Setting goals for your business helps you ask questions that you can then answer with performance or specific actions and through putting together the right financial reports.
Goal: Earn $100,000 in net profit in 2017.
- How much in gross revenue do we need to earn in order to turn a net profit of $100,000?
- How much gross profit do we earn for every sale or billable hour?
- How many sales or billable hours do we need in order to earn this much revenue?
Every business has questions. The ones that flourish can answer them. These answers come from financial reports.
Which of the following questions can you answer with your financial reports? Keep track to see how well your business is doing.
- Are your decisions and efforts resulting in desired outcomes? (Do you have specific financial goals and are on track to achieve them?)
- At what point of profit can you hire another employee?
- What was your company’s net profit last month?
- What is your current profit margin on your products or services?
- What percentage of invoices are not being paid by clients or customers within a standard 60-day period?
- What is your monthly and annual growth rate?
Based on Your Results, Here’s What To Do Now!
How many questions can you confidently answer?
0 – 1: You are not aware of your current financial standing and not on track to accomplish your goals, either because you don’t have goals in place, or because you’re not able to know what financial steps you need to take in order to achieve them.
You need to overhaul your financial system. First, make sure you have a strong bookkeeping system in place. Like a proper foundation for a house, bookkeeping serves as what your financial reports will be based on. Small mistakes will result in incorrect data.
After you have the right bookkeeping system in place, you need to know what financial reports you need. As mentioned in the article, your goals will dictate what reports you need to be putting together and tracking regularly.
Now you need to pull these reports monthly and analyze where you are in the process of accomplishing these goals. If you need help or are not sure where to start, setup an appointment with an accountant or virtual accounting team (we’re here to help!) to ask questions and get a better understanding of what to do now.
2 – 4: Your business is in an acceptable range, but are you okay with your business being “acceptable” or average? Intentionally and aggressively pursuing goals is how you will get ahead and rise above stiff competition. You need to focus your efforts on your goals and make sure you can answer all of these financial reporting related questions and more.
Since you’re on the right track already, reanalyze your accounting efforts to adjust what financial reports you pull and keep track of.
5 – 6: Congratulations! You are at a point where you can easily plan the steps needed to accomplish goals because you have a functional accounting system in place.
This does not mean your work is done, but where you are at presents new opportunities. Now that you have a solid system in place, you can find ways to save time and money without losing any of your current capabilities. As you know, bookkeeping and tracking financial metrics is time consuming.
If you are handling your own bookkeeping, look into working with a professional bookkeeper or virtual accounting team to save time and possibly money. Your time is valuable and should be spent on the most important aspects of your business.