No matter whether your business is large or small, the CEO is responsible for its success. As a small business owner, you need to know the basics of financial management. In fact, most small businesses that fail do so because of a lack of this understanding. The following are tips for small business success.
- Hire an Accountant
As a small business owner, there is no need to try to wear every hat. You are responsible for the success of your company, and you need to focus on delivering products and services to customers. A professional accountant can create quarterly financial statements, balance sheets, and profit and loss statements for you so that you have excellent and accurate numbers to use for decisions.
- Know Your Gross Profit Margin
You need to know your gross profit margin. This includes both the percentage and the actual number that you need to cover your expenses every month. You will be more successful when you understand this number.
- Understand Your Sales to Expense Ratios
It is important to look at your sales to expense ratios and track them regularly. Don’t wait until the end of the year; you need to know them so that you can make adjustments whenever it becomes necessary.
- Pay Attention to Inventory
Make sure that you know what you have in inventory at all times. You need to match what you have to your projected sales to make sure that you don’t have too much or too little in stock.
- Know the Days for Accounts Receivables and Payables
It is important to know which days you receive money and which days you have to pay it out. The two dates have a direct relationship, and you may have to plan ahead so that you can pay your expenses on time. You can’t manage your cash or grow your business without understanding these days.
- Plan Ahead
It is important to look to the future and make predictions so that you can see both opportunities and potential setbacks. You may see potential for growth, but it could be within a specific window of time. Conversely, there may be times of uncertainty, and you need to plan ahead to get through them.