Learn to Love Your Numbers

There is a legal principle that says Ignorance is No Defense. The same could be said for running your own business. In this case though, with the exception of breaking tax or other laws, the defendant is you, and the judge, jury and prosecutor are your clients, the economy and your competitors.

Being passionate about what you do is not enough. You must get past your emotions and do what is necessary to succeed as a business owner. Even when you hate doing some of the things that are required.

If you are “not a numbers person”, take heed, and take heart. Not knowing your numbers is like being captain of a rudderless ship. You are steering your business without a compass. But there are people and processes that can save you from disaster.

NUMBERS TELL STORIES THAT YOU WANT TO HEAR

Sales and Marketing Statistics tell you what works and what doesn’t. They point you to what kind of prospects and what approaches bring in clients most cost-effectively.

Cash Flow Projections allow you to plan your income and expenditures. If you have a heavy expense period coming up, you can put away some of today’s gravy for tomorrow, or put on a big sales push to increase your income. Cash flow projections and their after-the-fact counterparts, Cash Flow Statements, are excellent tools to stay in control of the day-to-day and longer-term finances of your business.

Financial Statements give you a comprehensive record of the past. They are essential for accurate tax filing and for going to the bank for a line of credit. They tell you if the things you tried to grow your business with last year are actually achieving your goal. Year to year comparisons show you variances in results and can be used, along with other reports and some reflection, to fine tune your operations for greater profitability. A 2% change in the right direction can result in a rapid 20, 30 or 50% difference in results.

HOW TO START LEARNING TO FALL IN LOVE WITH YOUR NUMBERS

Separate Your Business and Personal Accounts. Lumping them together has been shown to be one of the biggest factors in the early failures of start-up and mature businesses.

Take a Course to learn how to read financial statements. If you don’t understand the reports you are paying to have prepared, you are missing at least half the value of having someone prepare them for you. True, you need them for tax purposes. But many errors can be spotted by a savvy business owner, along with the need to change your List of Accounts and method of labelling expenses to provide more actionable numbers in future.

Talk With Your Accountant and ask him/her to walk you through the meaning of the reports you receive. Your accountant’s role is, among other things, to advise you on how set up your books to your own advantage so you have management tools for your business, and have the best tax-planning strategy built into your plans. He/she can help you interpret your numbers so you can more easily make important decisions in your business.

Bottom Line – There might not be a positive bottom line in your business if you don’t take care of the numbers. So make it a priority to learn, and to fall in love all over again.