Stop Being Misled By Your Bank Account
My heart sank as I stepped off the scale again... no change, for over a week. I was devastated. I was following my meal plan, exercising, and still not change. Hmmm.
My weight loss journey had been through several stages, and I was not enjoying this stage for sure. All my hard work and discipline... was not reflected on the scale... at all! Then I had a light bulb moment; I remembered when my trainer said that at times the scale may not move, however the body measurements will. I quickly looked for a measuring tape to measure my body. Quietly, I smiled when I realized there was reduction from the last time I measured.
Have you ever been misled by the wrong numbers?
Have you ever been deceived by the evidence?
It is not uncommon for business owners/CEOs and even individuals to use the size of their bank account to determine how successful their business is.
Are you using your bank account to make decisions about spending, hiring, going on a vacation and also just how successful your business is?
That is very risky! Your bank account does not tell the full story and it can be misleading, big time!
Why does your bank account not tell the full story?
1) There may be transactions that have taken place that are not yet reflected in your bank account.
2) Your bank account will not tell you if you are wasting money or having “money leaks” as a business owner.
3) Your bank account will not tell you how profitable your business is.
What makes the difference in assessing your business by using Key Metrics/Indicators.
Key Metrics/Key Indicators affect all areas of your company/business – finances, back- operations, team/labour and so on.
You made five or six figures in sales, great; are those monies collected? Were those sales profitable? How efficient is your team?
The following are 3 Business Key metrics/indicators which will apply to most businesses:
1. Days Cash on Hand - You don’t have a bank overdraft. That is great, however do you have enough cash on hand compared to your sales. If you have 5,000 in the bank after making sales of 30,000, that is a different scenario versus having 5,000 after making sales of 650,000. This ratio determines how healthy your cash on hand is in your business.
2. Burn Rate- How quickly will you run out of cash? Based on the expenses and income for your business do you have enough cash for meeting those demands.
3. Profit Margin - You made sales however were they profitable? How much did it cost you to make those sales.? This ratio is a one that allows you to compare the performance of your business to the industry as well as your competitors. Profit can lead to cashflow, so it is important that you monitor this ratio at least monthly.
I learnt from that day to monitor my weight loss with the right indicators and look at the total changes in my body to not be misled and of course to assess my overall changes correctly.
Take the steps as soon as possible to use the relevant indicators/metrics to assess the state, performance, and growth of your business. Do not be misled anymore!
When business owners find their businesses in financial chaos and are serious about taking the leap to say hello to cashflow and more, they reach out to Kirsha Campbell, “The Cashflow Maven.” A CPA/CMA, Kirsha integrates all the moving parts in your business to set up the right foundation to be recession proof, operate with reduced risk, increase cashflow, and set up effective systems and procedures. Kirsha helps business owners say goodbye to being overwhelmed, stressed, and frustrated about their businesses’ results and operations. Visit Kirsha at https://www.linkedin.com/in/kirsha-campbell-cpa-cma-cashflow-maven-on-demand-cfo-7a315792/