Annual Accounts are just a jumble of numbers on a page that most business owners don’t understand. But in the right hands and with the right understanding those very same numbers can tell you so much about your business.
Let’s start with trends as they can reveal which way a business is heading.
Using the numbers in the Annual Accounts you can tell if a business is heading in the right direction or may run out of cash. You can tell if the business is working harder to make money or whether it has a handle on it’s costs.
Indeed you can use the numbers to provide a plethora of useful trends and ratios that really drill down into your business.
For example, you might have spent £2,000 last year on advertising. But the year before it was only £500 so why the increase? Did it have the desired effect in that sales or customer numbers grew? Let’s look at the number of customers you have and how much they normally spend. Then, let’s look at how often they brought from you. Are these showing an increase or decrease over time?
If nothing changed despite the increase in advertising spend then was it worthwhile? Once you can start to see the numbers and how they interact with each other it takes the fear out of Accounts and really helps with pricing and decision making.
There’s more of this on my website.