One of the best things to happen to small businesses - heck, to
businesses of any size - is computerized accounting.
Can you even imagine someone sitting down
with a two-column ledger book and documenting each individual sale, line
by line? It's the way companies did it for centuries, until recently.
We're fortunate to be living and running our businesses in the modern
Despite my high praise for computers and
all the things they can do for your business, I still urge you to
manually compute your most important numbers. That's right - use a
calculator and a pencil and write them down. Every month.
It's so easy to nonchalantly look at a
report - like a computer-generated income statement or balance sheet -
and put it aside. Critical numbers don't necessarily jump off the page
In fact, your basic reports may not even
give you certain important ratios. If you track revenue per employee,
the ratio of current assets to current liabilities, and other key
ratios, you may well have to calculate these manually.
Determine what numbers, ratios and other
key performance indicators are important enough to track monthly.
Set an acceptable range - maybe even
specific high and low "red flag" limits - for these indicators.
Create a routine for this work. Set
aside some time, and use the same format each month. You might do your
calculations in the margins of your computer-generated reports, you
may use a blank sheet of paper, or you might design a
fill-in-the-blanks form. It doesn't matter how you do as much
as that you do it.
Working from your computer reports, find
the numbers that you'll need and do your calculations. Do it
religiously each month.
If everything is within acceptable range,
terrific. Celebrate with your team and maybe even give out some sort of
reward for a job well done.
When you find numbers that are out of
whack, spring into action and do something about it.
Of course, timely monthly reports are key
to making this work. If you're getting your reports weeks after the
month closes, that is a problem that also needs to be tackled.
Using this simple and low-tech approach,
you'll quickly develop a "feel" for your numbers and will stay on top of
problems while they are still small and manageable.
Bill Collier is
a St. Louis-based business coach, consultant and speaker. He is the
author of the book “How to
Succeed as a Small Business Owner … and Still Have a Life.” His
website is www.collierbiz.com,
and his email is email@example.com
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