Step 1
Numbers 101 is up to date, accurate, accounting records.
Here are my top tips for getting Numbers 101 right
- Use an accounting software like Xero (and expense AI like receipt-bank or Hubdoc)
- Use a business bank account solely for business purposes (do not mix business and personal, do not treat your business bank account like a personal ATM)
- Keep your accounting records up to date & accurate on a daily or weekly basis
- Do not overdraw money from the business (draw less than the cash profit minus assets purchased & loan repayments, in wages or drawings)
- Reserve money for ATO, supplier & employee obligations (including employee leave, a hidden devil)
We see the consequences of ignoring Numbers 101 first hand. They are
- Business failure
- Business & personal bankruptcies
- Personal stress, the worst of them all
Your numbers are the foundation upon which everything else is built.
That’s why all Top CPA Accountants list Numbers 101 as Pillar 1 for success.
Because what we find is that once we help our clients get Numbers 101 sorted then it’s like a springboard for success. We can then start working with them in a way that translates to a 10x plus return on their investment with the ultimate goal of pulling more time, money & freedom out of their business.
The key principles around Numbers Knowledge are
1. Understanding how to “run & read” your profit & loss (over 12 months) both accrual & cash
2. Understanding cash flow & how to ease cash flow pressure
3. Understanding how to run & read your Balance Sheet
4. Understanding how to predict your obligations (ATO, Supplier & Employee)
5. Understanding your industries standard numbers (benchmarks)
6. Understanding what optimal business performance looks like (in the numbers)
Have you mastered these yet?
A lack of Numbers Knowledge means you’re probably leaking profit, leaking cash & missing out on easy wins that could save or make you a ton of money.
We find that when we engage our clients around Numbers Knowledge, they start saving and making money immediately. Here are my top tips for getting Numbers Knowledge under your belt
1. If you DIY the books reach out for some help to deep dive into your numbers
2. Using a Bookkeeper already? Ask her whether she offers Strategic Bookkeeping services that can help you understand what it all means
3. When working with anyone in Numbers Knowledge, use my 6 fundamental points listed above as a guide so you cover all bases
4. Prioritise this. Make time in your schedule to know your numbers.
Step 3
Numbers Strategy is all about
- Creating meaningful numbers (which is different to accurate numbers)
- Reviewing your profit & loss in a Strategic way
- Reviewing your balance sheet
- Reviewing your cash flow
The consequence of lacking Numbers Strategy is that your business won’t be performing optimally & you’ll be leaving cash & profit on the table. This is also what we call cash & profit leakage.
What we find is that when our clients get savvy around Numbers Strategy then they can
- Identify the good from the bad, that is: what are their pain points? Where is the profit and cash all going?
- Dive into the problem and come up with a plan to solve it
- Take action
- See the results month by month
Which all adds up to a healthier bottom line.
If you’ve identified that you need to improve around numbers strategy here are my top tips
- Reach out for some support around your numbers. Did you know that the best Strategic Bookkeepers & Accountants engage consultants to hold them accountable to their numbers? If they need support them it’s likely you do too
- Change your mindset. Errors in thinking are often holding you back. Now that you what the consequence of no Numbers Strategy, make this a priority
- Schedule time in your diary to work on Numbers Strategy (and perhaps use your project management software for this too)
- Bring Numbers Strategy into your monthly financials / KPI meetings
And don’t be overwhelmed. A great Strategic Bookkeeper will take you on a journey & step by step you’ll get results.
If you follow my tips & get Strategic around your numbers you will increase revenue, reduce expenses and find more profit & cash.
If you’ve mastered steps 1 to 3, have you mastered Numbers Targets?
Are you setting meaningful targets & other financial KPI’s?
The principles around Numbers Targets are
- Setting a Turnover Goal
- Setting other key financial KPI’s
Ready to measure, monitor and take action.
The consequence of failure around Numbers Targets is cash & profit leakage. You simply won’t be optimising your business for profit and cash. You’ll be leaving tens of thousands of dollars on the table.
Conversely, the benefits and what we see when our clients commit to their Numbers Targets are incremental improvements that all add up to a better bottom line.
You can’t improve what you don’t measure & it all starts with creating goal posts (KPI’s, goals, budgets).
My top tips around Numbers Targets are
- Nail the areas around Numbers 101, Numbers Knowledge & Numbers Strategy first
- Then deep dive into your numbers
- Have your industry benchmarks handy as a guide (or use the rule of thirds)
- Set a Turnover Goal & other financial KPI’s (like Gross Profit, Net Profit & Cost of Sales)
- Wrap up your results in project management software like notion.so & ensure you use the data every month in a Strategic way
When you commit to Numbers Targets you become a data-driven-organisation and that is key to success.
If you’re struggling with Numbers Targets (or the steps prior) it’s investing in some help because you will get a great return and pull more time, money & freedom out of your business
Numbers Monitoring is the final step in our 5 step method and it’s all about engaging in your numbers in a way that measures your business performance.
The principles around Numbers Monitoring are simple but powerful and they are
- Reserving time each month to strategically review your numbers
- Comparing your actual numbers to your forecasted numbers (goals, budgets, KPI’s)
- Deciding on & taking action based on the results
Every time you repeat the Numbers Monitoring exercise you’ll find ways to increase profit and cash. Some of our clients are shocked by what they’ve been missing out on.
My top tips to help you in the area of Numbers Monitoring are
- Master the areas around Numbers 101, Numbers Knowledge, Numbers Strategy & Numbers Action first
- Schedule time in your diary monthly to review your numbers
- When you review them, compare your actual numbers to your goals, budgets & KPI’s
- Write down what action you need to take to improve on the numbers (and then take action)
- Consider having your Strategic Bookkeeper hold you accountable in a formal way (as this can really rocket your results)
You may not consciously realise it but all actions in business is taken as a result of your numbers. Think about it. Why do you take action or make changes in your business? It’s because of the numbers. If you do more marketing it’s to increase turnover numbers. If you increase your prices it’s to reduce the cost of sales numbers.
When you master Numbers Monitoring you’ll be moving from taking “reactive action” and getting patchy results to taking “proactive action” and getting powerful results. We call this the transformation from “reactive technician to proactive professional”.