Financial KPIs for SMEs: Making Numbers-Based Decisions
09 August 2018
The phrase “Cash is King” is well-known, but a king ignored is of no benefit. Too often I come across businesses who have less than an adequate handle on their finances. Just to be clear, knowing if the company made a profit, roughly knowing profit margins, and having an accountant prepare a P&L once a month is not Financial Mastery. Simple-but-effective financial KPIs are crucial for making sound numbers-based decisions.
If you want your business to achieve significant and sustainable growth, you’ll need to know your numbers. You have to be comfortable enough with them to ‘play’ with them, making forecasts for different scenarios and pricing decisions. If you can master this skill, there is no business you can’t run. Businesses ultimately boil down to the figures; the better you are at understanding these figures, the better your decision-making.
Running the numbers is one thing, but knowing which numbers track and to tweak for greatest impact is a whole new ball game. To start off, this 5 Growth Levers PDF will take you through the most basic financial KPIs you need to be tracking, and how influencing key areas in your business will have a massive impact on your bottom line.
Action Point: Get an accountant on board. Either hire one, or outsource your accounting work. But I don’t just mean have one on the payroll. Your accountant needs to be actively involved in decision-making, in identifying areas that can be improved on, in breaking the numbers down for you. You can’t know all the details, so don’t waste your precious time trying to figure it out.
The next step is forcing yourself to understand what the numbers mean. You don’t need a degree in accounting, an understanding of the half-dozen or so core concepts of accounts should give you most of what you need to know. Your accountant should be able to explain the rest to you.