The 5 Numbers Every Small Business Owner Should Know

You don't need an accounting degree to understand your business finances.

But you do need to know a few important numbers.

If you couldn't answer these questions without opening a spreadsheet - or calling your bookkeeper - it's probably time to start paying more attention to your financial statements.

1. How much revenue did you generate?

Revenue is the money your business earns from selling its products or services.

You should know:

• How much you've earned this month

• How much you've earned year-to-date

• How that compares with previous periods

Revenue tells you about the top line of your business.

But don't stop there.

More revenue doesn't automatically mean more profit.

2. How much are you spending?

Knowing your expenses is just as important as knowing your revenue.

Look at both the total amount and where the money is going.

Are your expenses increasing faster than your revenue?

Are there subscriptions you're no longer using?

Are certain categories unexpectedly high?

Your bookkeeping can help you identify these trends.

3. What is your profit?

Revenue tells you how much came in.

Profit tells you what's left after expenses are accounted for.

Your profit is one of the most important indicators of how your business is performing.

And here's something important:

You shouldn't have to wait until December to find out whether your business is profitable.

4. How much cash do you actually have available?

This is where your bank accounts come in.

But remember: your bank balance isn't necessarily the same as your available cash.

You may have upcoming bills, payroll, credit card payments, loan payments, or other obligations.

Understanding your cash position is critical to making good business decisions.

5. What do your customers owe you?

If you invoice customers, your Accounts Receivable balance is an important number to know.

A business can have strong sales and still experience cash problems if customers aren't paying on time.

Ask yourself:

How much money have I earned that hasn't actually been collected yet?

That's a number worth watching.

What should you do with these numbers?

Don't just look at them once.

Look at them regularly.

Compare them to previous months.

Compare them to the same period last year.

Look for trends. Ask questions.

Your financial statements become much more valuable when you use them to understand what's happening in your business.

You don't have to do this alone

This is where having a bookkeeper can make a huge difference.

My job isn't simply to put transactions into QuickBooks and send you a report.

My goal is to give you accurate information you can actually use.

Because the numbers in your accounting system should help you run your business—not confuse you.

If you aren't sure what your numbers are telling you, let's take a look.

You don't have to become an accountant. You just need to understand your business.