Reply: 5 Financial Numbers Every Small Business Should Be Tracking from Day 1 & why!

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5 Financial Numbers Every Small Business Should Be Tracking from Day 1 & why!

Title of my Post: Important things to remember when starting a small business.

The article that I was assigned was interesting and covered five things that newly established small businesses should follow. In the article, it mentions that at the beginning stages of a small business, owners need to be setting up financial modeling and reporting. The article then went on to describe 5 things that can help new businesses stay on the right track to success. Granted the list is not inclusive, and there might be other elements to consider, but from what I read I thought it provided an excellent starting point.

The first topic on the list was cashflow runway. This part described, "while businesses is developing, they need to know how many months of cash your business has before you go broke" (McIver, 2022). It also mentions how a person needs to know the industry average and then add 20% to be on the safe side and then observe how much cash flow you have. The second topic was Accounts Receivable Percentage Overdue. Under this section, "a business must look at the percentage of sales paid on time against the sales that are late, and then look at your industry average" (McIver, 2022). This part is important because if the owner is not collecting that money from their sales, then their profit will never be realized. In addition, number three discussed monthly cash flow and it stated that most businesses don't fail but instead they go broke. Moreover, it highlights that a failing business is one where its sales revenue isn't sufficient to cover its cost (McIver, 2022). Consequently, the article also describes a broke business as one that cannot meet cash flow demands of a particular phase of that business (McIver, 2022). In my opinion, these differences are crucial to keep in mind when starting a business as these situations are the result of many businesses not surviving and being successful.

In bullet point number 4 it talks about cost of goods sold. Under this point it discusses, "if you are not tracking your costs of goods sold accurately and if you don't check those costs on a regular basis, you may not realize that you are actually losing money on sales" (McIver, 2022). This aspect is very important as a new business owner needs to account, for these specific details at all times in order to maintain control of their business, and to ensure they make a profit. Finally, the last number that was referenced is sales revenue allocation. Under this topic it discusses that new businesses should not put all of their eggs in one basket because when you do it can be limiting (McIver, 2022). Overall, I enjoyed reading this article and thought it had some good points to it. Lastly, I definitely learned some important aspects to think about should I ever open my own business or help manage one.

Reference: McIver, R. (2022, May 5).5 Financial Numbers Every Small Business Should be tracking from Day 1 and Why[Review of5 Financial Numbers Every Small Business Should be tracking from Day 1 and Why]. Score. https://www.score.org/resource/blog-post/5-financial-numbers-every-small-business-should-be-tracking-day-1-and-why