If you’ve followed my blog for a while, you will know that my catchphrase is ‘Know Your Numbers!’ The numbers tell the story of your business, and numbers don’t lie.
I speak to entrepreneurs all the time, though, who get overwhelmed by tracking all the numbers. If you’re trying to keep on top of every individual piece of financial data, it can feel like too much. That’s when we shut down.
I want to break down the five most important areas of your business to stay hyper focused on. This means you won’t get overwhelmed, and if you focus on these numbers, you’ll see more money in your pocket!
Number 1: Revenue
In an ideal world, you would be tracking your revenue daily. This isn’t always possible, I know, so try to make an effort to track your revenue weekly at a minimum.
Revenue is all the money your customers pay your business. Go through your business checking account and make sure you are tracking only deposits that relate to a sale. If you use a system like Stripe or QuickBooks, you will be able to pull a simple revenue report.
If you’re just using a bank account for your income (and I don’t really recommend this), you will have to go through and manually add up all revenue deposits. Make sure to download a copy of my free Profit Plan tool to help you with tracking your revenue.
I want you to track your revenue and look at the pattern of income. Are some weeks/months higher than others? Why?
As an entrepreneur, we need to know what the data is telling us. This allows us to ask the important questions that will help yield more money.
Number 2: Expenses
Expenses are all the things you’ve had to pay out for your business. This might be payroll, office supplies, advertising – anything you’ve spent that is directly related to your business!
This isn’t your mani-pedis and long lunches.
I’ve talked about calculating revenue and expenses in detail before. Check out this previous blog post for more detail on what and how you should be tracking business expenses.
Knowing your accurate revenue and expense data is essential for the third number you need to be tracking…
Number 3: Profits
Your profit is how much money your business actually made. Profit is calculated by finding your revenue, and minusing your expenses. It’s a relatively simple calculation, but it starts with you. You need to know the data for your revenue and expenses in order to calculate how much your business made.
If revenue is the money your customers paid to your business, profit is the money your business paid to you.
Think back to when you were an employee. The gross paycheck that you received every two weeks is the same as the profit in your business now. It’s the money you’re paid but not necessarily the money you keep…
Number 4: Taxes
Knowing our profit is great. It’s our gross pay – the money our business made. But we don’t get to take all of that gross pay home. We need to make sure we pay Uncle Sam.
#disclaimer – what I am about to offer you is a suggestion, it is not tax advice. If you want help with preparing and filing your taxes, I strongly recommend you hire a CPA or similar (find out more here).
For now, this is just a basic rule of thumb that I follow:
Once you’ve calculated your profits, I recommend setting aside 20-25% for federal taxes, and a further 5% for state income tax (if applicable to your state).
Your profit is how much your business has made. Tax isn’t deducted before calculating this, because tax isn’t an expense – it’s a legal requirement. When you deduct your taxes from your profit, you end up with your net profit – the amount you get to take home and use as you wish!
I hope it’s becoming clearer how all these numbers are connected to one another, and why it’s vital that you track them regularly. But if you really don’t have the time to keep on top of this data, there is one number I need you to be looking at every day…
Number 5: Cash Flow
Cash Is Queen.
The number one reason that businesses fail is lack of cash. Here’s a hard truth: even profitable businesses can fail due to cash flow problems.
This is the one number that is really going to be the difference between your business soaring or sinking, so for the love of everything on this earth, track your cash daily!
Make it a habit. Start your day with a coffee and a quick look at your checking account. Entrepreneurs that are swiping their debit cards, writing those checks and sending cash with venmo without checking their accounts are walking a fine line.
If you have $3000 in your checking account, but you just wrote a check for $4000, then you’re in danger. You have to be aware of the cash you have available for your business at all times.
If you don’t know what’s going on in your bank account, you don’t know what’s going on in your business.
Schedule time in your calendar each week to sit down and track your numbers. Don’t forget to download a copy of my free Profit Plan tool. It’s going to help you organize your money, come up with a plan for profitability and it really breaks down how to track this data.
The truth about tracking your numbers
Your business needs bookkeeping.
It is impossible to run a successful, profitable business without keeping a regular eye on what the numbers are telling you. I strongly suggest you get a great bookkeeper to help you keep on top of your data.
I would love to chat with you about the bookkeeping services we offer, just comment below or send me a message. But even if you decide not to work with us on this, it’s a service I highly recommend you outsource.
Bookkeeping should be done weekly within your business, and you may well feel confident doing it yourself. The point is – make sure it happens!
Moving your business forwards through tracking your data
I hope you’ve found the information in this post helpful, and as always you can watch my YouTube video to see me talk through the 5 numbers every business owner should be tracking.
If you can make a commitment to yourself to track this data, you’ll be amazed by what you can achieve in your business.
Check out my website to learn more!