In today’s world, we are continuously working towards tackling obstacles and learning new skills. And, at times it can be very overwhelming, especially in recent circumstances where there has been a lot of uncertainty and presumably, a lack of sales. With that being said, now is a perfect opportunity to look at where you are and determine whether you are where you want to be…
So… How do you determine where you are?
It goes without saying that business success needs to be measured, but what is it do you need to measure?
Most successful businesses choose four or five critical numbers to measure. These may vary between businesses, for example, most businesses should know their minimum viable sale number per day or week. In the same way, knowing the gross margin needed to cover your overhead costs and living expenses is critical for many businesses.
Examples of critical numbers might be:
- Number of days it takes to be paid by debtors
- Return on investment by each team member
- Average value of each new customer
Once you are aware of what numbers you are focusing on, it’s time to find a way to measure them. One thing we find super useful is using Xero Cloud Accounting, which allows us to easily track and monitor our clients business performance. The way you capture your business data may need altering slighting due to the software you use to measure your numbers – You may need to make changes to the structure in order to make it work to your specific needs.
Measuring and reporting is essential for business growth. Having real-time, digital reports of your numbers is so important.
Here’s an example…
If you identified your sales total for the year needed to by, say 500k – that equates to, say, £10.5k per week if your business is open 48 weeks per year. You’ll want to have a system for recording how you’re going against that target.
Likewise, if you have debtor terms of 7 days and your debtors are currently taking 41 days to pay you on average, you’ll want to measure if that number is improving.
As previously mentioned, we strongly recommend you measure no more than five of your most important numbers – we call these Key Performance Indicators (or KPIs). Once you have the KPIs and a budget, it’s important to have these numbers loaded into a monthly reporting system so you can track your actual results to your budget.
We can help you with the most appropriate technology to use for your business and if you need help working out what critical numbers are best for your business or how to measure them, give us a shout, we would be more than happy to help you!
Email: info@xebraaccounting.co.uk
Phone: 023 8000 1313