I was waiting for the pest control guy to show up for our annual termite inspection and my phone rang. It’s the pest control guy and he can’t find my house. Let me just say, my house is not easy to find. I live in the middle of nowhere. Houses are about a half-mile apart and it’s 15 miles to the closest gas station. And most of the time, GPS is wrong (no matter how many times I send corrections to the many GPS providers).
I proceed to ask him where he is so I can give him directions, and he literally said, “I’m in front of a big white farmhouse.” Now, if any of you have ever spent any amount of time in the rural Midwest, you know that “big white farmhouse” describes 90% of all the houses. This was NOT helpful to me. He had no idea where he was, and I cannot tell him how to get to my house.
This is a lot like when small business owners say, “I want to grow my business” or “I want to improve my cash flow.” I ask questions about their current gross sales, cost of goods sold, profit margins, average sale per customer, accounts receivable turnover, etc. They have no idea what these metrics are for their business, or worse yet, they’ve been relying on QuickBooks reports that are inaccurate because their QuickBooks files are incomplete.
Small business owners know they want to be successful, but they haven’t defined what that means or how to get there. How can they possibly get to where they are going without knowing where to start or where they are headed? Success to a small business owner can be measured in many ways, including gross sales, number of customers, net income, hours worked, life balance, etc.
Regular, accurate financial statements and reports are the best tool a small business owner can have. They will show where the business is today and provide feedback to the small business owner if they are on the right track in reaching their goals. Not sure which report to use? Wonder if it’s accurate? Don’t know which metrics to use or how to calculate them? Get a professional to help you create accurate reports and you’ll be on your way to achieving your goals.
What is your definition of “success”? Have you developed a plan with measurable goals to get you there?
Do you have an accounting question you would like answered? Submit a question here and it could be featured in an upcoming blog post!