What numbers should a business owner understand?
At minimum, understand revenue, gross profit, overheads, net profit and cash. Those five numbers tell you whether sales are turning into margin, whether the cost base is under control and whether the profit is actually turning into money in the bank.
Start with the numbers that matter
At minimum, understand revenue, gross profit, overheads, net profit and cash. Those five numbers tell you whether sales are turning into margin, whether the cost base is under control and whether the profit is actually turning into money in the bank.
Then look at what is driving them
The useful numbers are the ones that explain the headline result. Depending on the business that might be average order value, utilisation, debtor days, recurring revenue, labour cost, stock turn or gross margin by service or product.
Profit isn't cash
A profitable business can still run short of money because customers have not paid, stock has been purchased, tax is due or debt is being repaid. That's why the bank balance should never be used as a substitute for proper financial reporting.
Use the numbers, don't just file them
You don't need to become an accountant. You need a small set of reliable numbers that you understand well enough to make pricing, recruitment, investment and cash decisions with confidence.
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