Top 5 Ways to Improve Financial Performance in Your Business
Small businesses contribute to our communities through economic growth, innovation and community involvement. Entrepreneurs often start out envisioning increased earnings potential, control over their schedules and the opportunity to live out their passion. But owning a small business is challenging, and failure rates are high. Demands on the owner’s time, energy and financial resources can lead to burnout.
Small business owners need accurate, relevant and timely information to make decisions about their business. They need intentional, focused indicators to quickly tell them how things are going and where they are headed. They need their team to be engaged and empowered to grow the business along with them.
Below are the Top Five Ways small business owners can increase financial performance in their business, allowing them to thrive, while reducing stress and avoiding burnout.
1. Develop Financially Fluency
A basic understanding of financial statement terminology and meaning is foundational. You don’t need a degree in accounting, but you do need to understand what your financial reports are saying to you, your lenders and your investors.
2. Accurately Account for the Past
Once you understand what your financial statements are saying, it’s crucial the information is accounted for accurately and in accordance with acceptable accounting methods. This will allow you to see the true financial results of all your hard work.
3. Refine your Accounting System for Relevancy
The next step is to make sure your financial reports provide relevant information so you can make smart financial decisions. You must analyze and refine your chart of accounts and reporting formats to give you quick access to the information you need.
4. Develop KPI Reporting
The basic financial statements report what has happened in the past — lagging indicators. To impact future results, you must also identify Key Performance Indicators (KPIs) that focus on the activities happening right now — leading indicators.
5. Implement a Performance Measurement System
Once you’ve identified the KPIs for your business, you must engage and empower your people to improve the numbers. Measurement drives performance.
Are you ready to get back to your passion? Focus on implementing the five items above to improve the financial performance of your business, and you’ll have the information you need to make smart financial decisions in your business allowing you to grow and thrive.
For more information on the Greater Des Moines Partnership’s Top Five series, visit the Business Resources page. While there, be sure to register for the next Top Five series.