10 Jul Getting your head around the numbers
Or the ‘numbers stuff’ as I like to call it.
Depending on your background, the ‘numbers stuff’ can be an intimidating area if you are new to business or even if you’ve been running your business a while.
It can seem like a dark science that you need to be really good at numbers to understand.
Or one of those people wearing grey, normally with glasses, who always have a calculator to hand and don’t like too much eye contact. (It’s okay Accountants before you tell me off for stereotyping – I’m one of you really, but I managed to escape my Finance career just in time!)
I think there is a really important distinction to make in the numbers stuff to split it into 2 parts. One of which you don’t need to understand and one of which you must if you are you going to be a successful business owner.
The good news is the first part’s harder and much more complicated and the stuff you really need to know is relatively simple – yes, even if you believe you are no good with numbers. (By the way, we really should have a chat one day about that limiting belief…)
And the harder part is….
Your accounts. Lots of people assume they need to understand this to run a business. You don’t. Well, you don’t need to know the detail, just the top level of how much money you are making. That is what we have accountants and book-keepers for. These people have studied long and hard so they know what they’re doing.
Depending on the size of your business, your accounts may be really simple and you may feel happy and confident doing them yourself. If not though, this should be the first area you look to outsource.
There are lots of great people out there offering different levels of service based on your needs so it doesn’t always need to be that costly either.
A good accountant should be a good investment and save you not only time and headaches, but also money in terms of the tax you pay to HMRC.
The bit you need to know….
What you do need to understand is how your business makes money. Put really simply this comes down to 3 levers:
To increase the amount of money you are making you need to look at reducing costs, increasing prices or increasing volumes of sales. That’s it!
These are the numbers you need to stay close to at all times. As long as you have a handle on these and can react to tweak them as needed, then you’ll be fine with the numbers stuff.
And, if really can’t bear the detail stuff, hire a book-keeper / accountant to make sure you are keeping HMRC happy and paying those taxes on time!