Vital financial questions
What are the most important financial facts I need to know to be a successful small business owner?
Here are the five most important financial questions you MUST always know the answers to, but not necessarily in order of importance.
1. How much profit do you really make on each of your 10 largest customers? The profit you make on those big customers determines in large measure the profitability of your business.
2. How much does each product you sell really cost? Increasing sales volume is not as important as incremental profitability.
3. How quickly does your inventory turn over during a year? Stored inventory is costing you money and tying up precious capital.
4. What is the spread between receivable days and payable days? The spread between how long it takes you to collect cash from sales and how quickly you have to pay cash to vendors is how many days you're giving your customers interest-free loans, and how much cash you have to come up with from other sources.
5. If your business does what you expect it to, when will your cash reach its highest point and lowest point in the month or year, and how much cash will that be? This will help you forecast and plan your cash requirements.
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Related Categories: Accounting, Finance, Taxes, Banking, Business Planning, Cash Managment, Credit, Inventory Management, Management, Selling
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