Financial management isn’t something that everyone enjoys but it’s key to running a successful business. Whether you are keen on crunching the numbers or not, you need to develop a system to help manage the flow of your finances.
You can’t Manage what you don’t Measure
Start by diligently tracking your debits and credits. If this is not something you are good at or have time to do, hire or sublet a bookkeeper to take care of your books. It’s ideal if your books are managed daily but if this is this is not possible, be sure to have them updated weekly at the very minimum.
Understand Financial Metrics
Next, you need to understand the meaning of your financial metrics – gross profit, net profit, and EBITDA. Gross profit is the money your business makes after deducting the cost associated with running your business. Your gross profit is your revenue minus the cost of goods sold. Net profit is the money your business makes after deducting the cost associated with running your business, expenses and taxes. EBITDA are your earnings before interest, tax, depreciation and amortization. It’s a way to evaluate and measure your company’s performance.
Understanding these metrics will help you have a better grasp of your finances and therefore, make decisions to better your business for today and the future.
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