If your company is growing quickly it’s easy to be taken up with getting new business and managing all the issues that growth cause, and not to be focussed on whether you’re going in the right direction.
It’s quite common for turnover to grow but profits to fall, and for cashflow to get tighter and tighter. Unless you’re right on top of the numbers it can go on un-noticed until one day you find you’re in danger of running out of money.
One of the keys to growth is maintaining your gross margin. Margin usually falls when turnover grows quickly; there aren’t many prizes for having the least profitable customers just so you can see turnover going up – remember that turnover truly is just vanity.
So you absolutely have to have visibility of the really key things that are going on at the heart of your business. And there’s a simple way to make sure your hard work isn’t going to waste; make sure you’ve got brilliant financial management information that tells you exactly what’s going on, every month.
- You need to see your profit and loss each month; what were sales, gross margins, overheads and how much actual bottom line profit did you make?
- Closely monitor and control your gross margins, make sure your sales team fully understand the impact of giving discounts or buying business.
- How much profit does each of your customers make? If your systems won’t currently tell you this then I suggest you find a way to get at these figures. Most businesses have a few customers that actually lose them money.
- What profit are you forecasting to make this year – is it more than last year’s profit?
- Are your overheads under control or are they growing quicker than your profits?
- Make sure you have a rolling 13 week cashflow forecast so you can see pinch points coming in plenty of time to fix them.
And most important of all, set aside time on a regular basis to look at your information, pause, and make sure you’re all on the right track.