What is the importance of financial information for entrepreneurs?
Simply speaking, it is easier to multiply your assets if you know what they are. In business, this without question means keeping a close eye on your financial statements and appreciating what is the importance of financial information for entrepreneurs.
Overestimating your cash flow possibilities is a prevalent issue. Unfortunately, it is also a popular reason for business failure. It’s only too easy to forget that the money is not yours until it’s in your account!
The anxiety, uncertainty and inability to make business decisions money problems can cause. How to save yourself a few sleepless nights and make it easier for your organisation? Here are a few pointers.
Begin by defining three financial key performance indicators.
They need to be written down and quantifiable. Here are some examples to get you started:
• Burn rate (how much does it cost you to run your business for a week, a month, or a year), is helpful when assessing the sustainability of your organisation
• Net profit margin indicates if and how fast you can grow
• Inventory turnover tells you how competent you are in fulfilling orders and restocking
• Sales growth illustrates trends that can assist with forecasting
• Debt to equity ratio to tell you if you are making or losing money on your investments
• Operating cash flow, to see if you have enough £’s to cover daily operations
Talk to your accountant and business growth coach to choose the most optimum ones for your current situation.
By the way, if you do not have an accountant, get one.
It is a no brainer, even for small businesses, not to mention complex enterprises. Fiscal rules are complex, and they change. It takes experience and knowledge to know how to operate within them. Whilst you can manage your tax return, an accountant will do it faster, and – most likely – better. Ask yourself whether pondering income statements, loss statement, cash flow statements is the best use of your time as a business owner. Why not leave it to people who are good at it and want to do it!
Liza Minnelli famously sang that money makes the world go round, and knowing the money aspect of your business makes it easier to move things in the right direction. Cash is an incredibly dynamic element for an inanimate object, and somehow I have the impression that £s know when they are being managed. Keep good care of your balance sheet, and it will keep better care of you.