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Do you know your key numbers?

Do you know what the key numbers are in your business? The ones that you should be keeping an eye on and tracking on a monthly basis?

There are the "easy" ones:

  • Turnover - what is your income compared to last month, to the same period last year and how does it compare to expectations? Are you ahead or behind plan?

  • Cash - is there enough of it? Will it keep the business going for the next week, month, quarter, year?

  • Stock - how much stock do you have, is it too much or too little? Do you have the right quantities of the right lines?

  • ROAS (return on advertising spend) - a key one for retail businesses to know which ads work and don't.

If you are paying attention, you may notice I haven't included monitoring margins in these and there are a few reasons why:

  • If you are a product-based business, then to have accurate gross profit margins. You need to know your stock figures at the end of each month to ensure that the data in your accounts is correct - otherwise, your margin calculations will be skewed and unreliable.

  • You need to understand your sales mix and how this interacts with your margins. If you have wholesale orders and retail orders, then all of these will be at different margins which means the sales mix in the month can massively impact the margin that you achieve for the month. Without this understanding, using the data to compare periods will again be unreliable.

As with everything - getting the underlying source data correct impacts the figures that you review on a regular basis within your business.

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