As entrepreneurs, do you know the importance of knowing your numbers?

We often tend to ignore the importance of knowing our numbers. Our businesses depend on numbers to grow, scale and thrive. But so many business owners lack the skill to understand or comprehend their numbers.

As an accountant by profession, I enjoy the benefits of understanding my numbers. Not all entrepreneurs are as fortunate. Being a solo entrepreneur for more than 16 years now, I know the importance of money and numbers.

Part of my passion is to help entrepreneurs understand, know and use their numbers to thrive. Having the ability to know your numbers helps you make better informed decisions.

Here are 3 Steps to help you know your numbers:

The first step in becoming the master of your numbers, is to get the right support

Even if you google “free” resources, like blog posts, having some sort of guidance can help you. Professionals, like Accountants, can assist in implementing a basic budget and understanding financials.

When you start a business, one of the key foundations for a profitable business is your business plan.

Inside your business plan you have to be very clear about where you are heading. Having a clear compass will direct your steps towards success. Your numbers are the needle in your compass. Using a business plan helps you map out your money goals.

Knowing your numbers assist in knowing if your business has reached its goals or not.

The second step in mastering your numbers, is adapting a sound money mindset

Ever heard of the term, CEO Mindset?

I am sure you are familiar with this. As entrepreneurs, we often forget that we are the CEO’s of our lives, not only our businesses. As CEO’s, we often need to make difficult decisions. Our money mindset determines the way we interpret our numbers. This interpretation affects our decision making. Many business owners make poor decisions due to not understanding their numbers.

Today you might struggle with a scarcity mindset due to limited resources as a child. Your parents never talked about money, so you never learned how to master money. Many childhood traumas around money leads to difficulties managing our money. Our money mindset also impacts the way we view our self-worth.

As a business owner, you often have to “sell” yourself, your services, your products or your offers.

If you struggle selling or pricing, you lack a good money mindset foundation.

The third step in mastering your numbers, is implementing systems that simplifies processing

Cloud accounting and bookkeeping software is definitely a benefit.

Virtual Accounting Solutions also assists with simplified processes.

Running your business the “old school” way will cause frustration and many delays. Cloud accounting revolutionized the way we make business decisions today. Real-time reporting, multi-user access and freedom of location are great benefits.

Keeping your business compliant is a key part in running a successful business. Basic bookkeeping processes requires keeping track of all your business transactions. Submitting tax returns on time and declaring your profits all requires good processes. Monthly bank reconciliations and management reports assists in financial-decision making processes. It also enables business owners to stay in control of their finances.

Luckily, today we have access to a vast amount of online business accounting systems. Cloud Accounting and -taxation applications are globally used by small businesses today.

Your business success depends on the type of systems implemented.

Knowing your numbers empowers you to build a successful business. With the help of various online resources, running a business has never been easier. Reaching out to professionals like virtual accountants, can assist your business from anywhere. Implementing cloud solutions to run your business saves time, resources and money.

Online solutions are more affordable and easier to learn and install. Hiring virtual assistants and freelancers are becoming more popular for growing a business. Expanding your business beyond country borders provides now more than ever huge opportunities.

How to know your numbers – terminologies as CEO

Income

Also known as Turnover

Types:

• All sales,
• Payments received,
• Interest received,
• Deposits

into your business bank account

Expenses

Also known as Overheads

Types:

• Admin Fees Paid
• Bank Charges
• Interest Paid
• Dues and Subscriptions
• Depreciation
• Cost of Sales
• Contractor Payments
• Cash Wages
• Salaries
• Taxes Paid
• Marketing Expenses
• Software Costs
• Printing & Stationery Expenses
• Accounting Fees
• Research & Development Costs
• Internet & Hosting Fees
• Travelling & Entertainment
• Security Fees
• Cleaning Materials
• Vehicle Expenses
• Insurance Expenses
• Telephone Costs
• Rental & Storage Fees
• Repairs & Maintenance
• Bad Debts

paid out of your business bank account

Profit

Also known as Net Income

Types:

• Taxable Profit (Taxable Income)
• Income Less Expenses = Profit
• Profit Less Finance Charges etc Paid = Taxable Income
• Calculated Profit (Accounting Profit)
• Profit Less Depreciation and other non-cash expenses = Accounting Profit

Calculated on the Profit & Loss Statement (Statement of Comprehensive Income)

Carried over to the Cash Flow Statement (Statement of Cash Flows)

Assets

Types:

• Fixed Assets (or Non-Current Assets)
• Property, plant and equipment
• Buildings
• Land
• Finance Lease Receivables
• Current Assets
• Vehicles
• Equipment
• Furniture
• Electronics
• Cash and cash equivalents (in the Bank, Petty Cash, Investments etc)
• Inventories
• Trade and other receivables
• Loans to Directors, managers or employees

Calculated on the Balance Sheet (Statement of Financial Position)

Carried over each year from start of business

Current Assets Less Depreciation = Book Value

Depreciation is an expense on the Profit & Loss Statement (Statement of Comprehensive Income)

Liabilities

Types:

• Non-current Liabilities
• Finance lease obligations
• Installment sales agreements
• Bonds, Mortgages & Long-term Loans
• Current Liabilities
• Provisions
• Trade and Other Payables
• Bank Overdraft
• Short-term Loans

Calculated on the Balance Sheet (Statement of Financial Position)

Carried over each year from start of business

Equity

Types:

• Profit for the year
• Retained Earnings

Calculated on the Balance Sheet (Statement of Financial Position)

Carried from the Profit & Loss Statement (Trial Balance or Statement of Comprehensive Income)

Detailed breakdown on the Statement of Changes in Equity

Carried over each year from start of business

Cash Flow

Also known as the increase or decrease in cash available

• All income increases your cash available
• All expenses decrease your cash available
• All proceeds from financial liabilities increases your cash available
• All purchases of financial assets decrease your cash available

Your Profit for the period reconciles with adjustments that increases or decreases

Understanding the Statement of Cash Flows requires some skill

Financial Statements

Also known as:

• Annual Financial Statements
• Compiled Financial Statements
• Audited Financial Statements
• Reviewed Financial Statements
• Periodic Financial Statements
• Management Financial Statements

A set of financial reporting, drafted from the following:

• Trial Balance,
• Profit and Loss Statement
• Balance Sheet
• Customer Balance Summary
• Supplier Balance Summary
• Asset Register
• Liabilities Reconciliations

It is a compilation of all financial reporting for a specific period.

Drafted according to the International Financial Reporting Standards (IFRS) regulation board.

Because I am a heart-centered entrepreneur, passionate about helping other entrepreneurs build profitable online businesses, I created a 6-Step Roadmap to more clients, cash and confidence.

When you are ready to take the first step in knowing your numbers, reach out to me for a FREE discovery session that will help you determine the best ways to get to know your numbers. During this session you will also get a feel of what it is to work with a Virtual Accountant and I will help you determine your next steps in your business.

You can grab your free training here.

See you online!