What you’re about to read is genuinely possible and improvements, some similar, some smaller and some better could be made to ALMOST EVERY business in the country!
Throughout this introductory module of the Business Owners Success Series, we are going examine what occurred in a small business that gathered the following 7 numbers. 6 from its Financial Statements and 1 that doesn’t appear on the Financial Statements. We have rounded the numbers to the nearest thousand.
· Total Sales: $ 500,000
· No. of Sales Transactions: 5000
· Gross Profit: $ 150,000
· Net Profit: $ 50,000
· Accounts Receivable (Debtors): $ 60,000
· Accounts Payable (Creditors): $ 25,000
· Stock on Hand $ 50,000
By applying a simple plan with focus and discipline this business:
· Increased its net profit by: $ 43,100 (from $50,000 to $93,000)
· Increased its cash flow by: $ 84,000
· Increased the value of the business by: $ 86,200 (from $100,000 to $186,200)
· Increased the owners return on investment from: 14.93% to 29.7%
What's possible for your business?
The secret to good financial control is knowing what to control and by how much.
Throughout what follows, I will be covering the 7 Key Business Numbers that drive profit and cash flow and see how each number works in more detail.
The ‘7 Key Business Numbers’ are by no means a new concept. In fact, these numbers are the basics of sound financial management and have been around for years. The fact is that many Accountants and Tax Agents that you work with have quite possibly not taken the next step with you and explored the massive effects that these 7 numbers can have on your business.
The numbers apply to all businesses and work to a greater or lesser extent, depending on the business type and current financial circumstances. In this module, I don’t intend trying to explain how they impact on all types of business. It’s just sufficient to know, that they are almost all you need to know to be a good manager and controller of your own financials.