There is a reason that many small businesses end up in failure and close their doors. Owning and running a small business is a lot of hard work. There are several things that you have to be watching at all times to keep your head above water. You have to juggle not only day to day operations, but also customer service, marketing, building maintenance and much more. This is why many small business owners turn to an accountant to help then stay on top of things as far as bookkeeping and finances are concerned. Mark Dicus & Company is here to talk about some of the financial metrics that accountants can look at to see what the health of a small business looks like.
Financial Analysis of Measures & Metrics
In order to be successful, it is important that business owners have a clear understanding of certain financial metrics to help them effectively make informed decisions for their business moving forward.
– Revenue: The most critical metric that needs to be watched closely is going to be the revenue that your small business is bringing in. This gives you a clear picture of the total income that is generated from the services you provide or the products that you sell.
– Profit Margin: Working hand in hand with revenue is profit margin. This shows how effectively you’re able to turn the revenue generated by your business and turn it into profit. When you have a health profit margin, it shows that your business is managing costs effectively.
– Cash Flow: It is vital that your business has enough cash on hand to cover all the expenses that you are facing as a business. This metric is a clear picture of the money moving in and out of your business.
– Accounts Receivable: The money that is owed to you by your customers is known as accounts receivable. This can directly impact your cash flow if you have unpaid invoices.
– Accounts Payable: Every small business is going to have vendors or suppliers that they owe money to. This is the accounts payable. This is also something that gives you a clearer picture of your cash flow.
– Debt/Equity Ratio: You don’t want your business to rely too heavily on debt to keep things going. Having a good balance between the business’s borrowed funds compared with the owner’s equity is important.
– Break-Even Point: It is important to know where the point of sales, covering costs and no loss or profit is. It can help you set sales and use pricing strategies to help you become more successful.
Bookkeepers, Accountants & More in Summerlin, North LV, Henderson, Lone Mountain Village & Greater Las Vegas, Nevada
There are many financial metrics that the accountants at Mark Dicus & Company look at when we are determining the financial health of a small business. This can allow us to hep small businesses reach their financial goals more effectively. Call us today for help in small business accounting.