The 3 Numbers You Must Know In Your Business // Bookkeeping Tips for Business

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Don’t be flying blind when it comes to your critical business numbers. When you understand and track these three key numbers in your business you’ll be setting yourself up for success over the long term.

In this video Chris Eccles from Empower Accounting and Advisory shares more about the 3 numbers that all business owners should know.
– Gross Profit
– Break Even Point
– and Account Receivable Days.

So let me ask you, how many of these three numbers do you know? Number 1 is your gross profit margin.

This is the percentage of profit left on a job after all of your purchases and materials have been accounted for.

As an example, if you complete a $100 job and you spend $80 on materials and costs then you have $20 left over, or a 20% gross profit margin. So in your business calculating and understanding your average gross profit margin will ensure your quoting your jobs properly and profitably.

The fact is that even a 1% drop in gross profit on a $1M turnover business would cost you $10 000.

Alright so, number 2 – your break even point. This is the level of sales that you need in order to cover your operating costs.

This number is critical to know when setting sales targets to ensure that your target is set properly, ensuring you not only break even but can be profitable too. And finally, number 3 – your accounts receivable days.

Or how long on average it takes you to get paid. This number is critical when it comes to predicting your cash flow as an invoice sitting unpaid is not cash in your bank, right?

When you know this number, you can then focus on ways to reduce it, and encourage debtors to pay quicker and improve your cash flow.

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