The very scoreboard for business is the numbers held in the profit & loss statement and the balance sheet. Yet many operators fail to make great use of them in making decisions on the business.
Here are 5 reasons they may not pay as much attention as they should:
1. The numbers are principally to determine how much taxes we will pay. A necessary evil as such. Of course paying taxes is important all kinds of them and keeping records to allow such payment sis good. But this is not and should be the reason you keep numbers on the business. Keep them to make relevant current decisions.
2. The numbers can't tell me much more than my checking account balance. This myth is truly false in a business where much of the cash is pre-paid, your checking account balance should be full with your client's cash (not yours), because your have work to deliver based on their deposits.
3. All numbers are equally in CI. So what I do is the same as all my owner friends. Not true at all, having seen 300+ CI owners numbers few if any are alike. There are way too many ways of counting the beans.
4. The numbers are all about the cash and recognizing cash is the easiest way to get my numbers. This is a bad philosophy. You should align revenue (the delivery of goods and services) with their respective costs. In this way you know where you stand on each project. The production based method for recognizing revenue is the only legitimate method to use.
5. Numbers are too complicated and too hard to get to really make a difference. This is why we have developed easy to read metrics that are color coded to direct your priorities and actions in the business. They are industry specific not borrowed from a business that doesn't work in CI.
Get on a standardized chart of accounts, get monthly feedback on your numbers and take the actions to improve. It can be that simple.