It’s important to use data when running your business.
QuickBooks has powerful financial data, but you need to know how to use it effectively.
In this episode of MissionBusinessPodcast.com, Bernard Broesch is going to help you understand how to identify financial metrics you can use in your business and how to get those reports from QuickBooks.
If you have any questions about this podcast episode, please feel free to contact us.
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Which Financial Metrics Matter
The specific metrics you monitor regarding the finances of your business vary depending on a few factors.
- First, the financial metrics will be different for a service-based business versus a product-based business with inventory.
- Second, the circumstances of your specific business might determine what type of metrics you monitor. For example, a business with thin product margins or difficult cash flow situations may monitor cash flow related metrics more carefully than a business that does not have these same issues.
- Finally, the time frame you are trying to analyze may influence the financial metrics you monitor.
Short-term Financial Metrics
Over the short term, such as day to day operations of your business, there are a few metrics that you may monitor. Most are going to be related to cash available.
- This is because the cash available in the business impacts your day to day abilities to operate the business.
- Example reports could be abbreviated balance sheets that show bank balances or other short-term cash flow related metrics.
Medium-term Metrics
Over slightly longer periods of time such as week to week, metrics related to accounts receivable and accounts payable become more important.
- These help you understand if you are getting paid or will be paid soon for your work and also help you understand who you owe money to that you will need to pay soon.
- By keeping an eye on these types of metrics, you can better understand incoming cash flow and outgoing cash flow and how that impacts the day to day operation of your business.
- This will help you see potential issues that could happen in the future.
Longer Term Financial Metrics
Over the longer term such as month to month or quarter to quarter, the profitability of the business is important to monitor.
- While you should monitor the profitability of your business over all time frames, the trends that occur over longer periods of time can help you identify issues you need to address.
- You may run profit and loss statements for the entire business as a whole or individual projects if you use job costing.
- Compare profitability over current time periods with past similar time periods to understand if there are significant changes impacting the profitability of your business.
Financial Reporting Workflow
Start by identifying what types of metrics you need and when you need them by.
- The above short-term, mid-term and longer term metrics should help you as a starting point.
- Once you’ve identified what metrics you need, you can work with your bookkeeper to create reports from QuickBooks that are generated when you need them.
- Your bookkeeper will be helpful in configuring these reports within QuickBooks as sometimes you will need something more customized than the default QuickBooks reports.
QuickBooks Reporting Support
Disasters happen in a business because business owners think things are going well when they are actually not.
- For example, you may look at your bank account balance and feel like there is a lot of cash available.
- But if you ran certain reports in QuickBooks, you would see that the majority of that cash might be owed to vendors or employees.
Having great financial reporting in place helps you run the business based on numbers and trends rather than your gut feeling.
If you need support setting up QuickBooks reports for your business and identifying your financial metrics, contact Bernard today. You can also visit MissionBusinessPodcast.com for more insights that Bernard has been sharing with us in the previous episodes.
[Image: https://www.flickr.com/photos/teegardin/5537894072/ ]
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