Not all business owners enjoy crunching numbers, but that doesn’t change the fact that there are certain financial measures every entrepreneur should track. This post goes over some of the most important financials to keep an eye on.
Expenses are among the easiest financials to understand. However, if they are ignored, they can build up and cripple a business’s profitability. Here are some key expense areas to pay attention to:
- Liabilities cost the company money on an ongoing basis. Examples of liabilities include rent and loan payments.
- Assets are owned by the business. These can come in the form of equipment, real estate, and so on. Keep in mind that while a company may own an asset, some assets can still cost the company money. Real estate taxes are an example of that.
- The cost of goods sold is a measure of how much it costs to produce items for sale.
A company’s business activities—that is, the goods it sells or services it provides—bring in revenue. Revenue can be measured in different ways, according to Investopedia; for example, a nonprofit would count donations, grants, and membership fees in its revenue, while other types of businesses may not. It’s important to keep an eye on revenue. Problems with it can lead to cash-flow issues in the short term and a lack of profitability in the long term.
Profit and Loss Statements
Profit and loss statements are a final item business owners need to focus on. This measurement draws data together from other financials to produce a figure that reflects how much money is left over after deducting the business’s expenses. Typically, these come out every fiscal quarter or once per year. Profit and loss statements provide a useful overview of how the business performed during a given stretch of time.
To keep learning about financial data and a host of other topics, just take a look at the rest of Sudden Rivers Capital Corp’s other blog posts.