Do You Know Your Small Business Vitals?

Greetings,

On a doctor’s visit, the first thing the nurse
does is take your vitals: your temperature, blood pressure, pulse rate, and respiration rate. These basic measurements are the first place doctors look to see if something is wrong with our health.

Knowing your vital signs, and especially when they are out of whack, is good for your health. In the same way, knowing your business’s vital signs, and especially when they are out of whack, is good for the financial health of your business.

Vital Measures  If you’ve been in business a while, you might already know the “vitals” you like to track. Here are some common ones for a small or new business:

  • Checking account balance(s)
  • Cash flow requirements for bills and payroll
  • Revenue for the month and year-to-date
  • Sales by customer so you can see the top five to ten largest customers

As time goes on and your business grows, you may want to add some of the following:

  • Revenue for the month and year-to-date compared to last year
  • Net income for the month and year-to-date compared to last year
  • Days Sales Outstanding which is a measure of how long it takes to collect on an invoice from a client
  • Revenue by service or product line in a pie chart

What about these important metrics?

  • Best and worst selling products
  • Tracking promotion codes and coupon results
  • Work in progress or backlog
  • Number of days to fill an order

These are just a handful of the many options there are when it comes to measuring the results of your business, and it would be difficult for us to list all of them here. The point is to decide proactively what you would like to track on a monthly basis. Then you can set up the process it takes to get those numbers delivered to you in the format you prefer.

Once you decide on the numbers you need to run your business, you’ll be able to take your “vitals” whenever you want. You can take this to the next level with one more idea: exception reporting. Being Exceptional   It’s great to glance at your numbers periodically, but there can be a lot of data to wade through. How about getting a report that tells you only when the numbers go out of range? This is called exception reporting, and requires that you set ranges for each measure you want to follow. If the measure stays within range, you do not have to be alerted. However, if it falls out of range, then you can get a report to tell you what’s going on so you can take the right business action.Exception reporting is not all that common in small business, but it should be. It can save a busy owner a lot of time. A Clean Bill of Health   By determining the vitals you want to watch for your business and putting a process in place to monitor that information, you will be helping your business stay healthy. If we can help, please reach out and let us know. The doctor is IN.

Rhonda Rosand, CPA
Advanced Certified QuickBooks® ProAdvisor
New Business Directions
Phone: (603) 356-2914 | Fax: (603) 356-2915
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