"How much did I earn this month?" – If you need to think too hard before answering this question, you're not alone. Many business owners run their businesses on gut feelings instead of real data. They know money comes in and money goes out, but the full picture? Blurry.
The good news: you don't need to be an accountant to understand the numbers. You just need to know what to look at and how to track it.
Guesses that cost you money
When you don't know exactly how much comes in and how much goes out, you make decisions based on feelings. Sometimes the feelings are right, but sometimes they're wrong – and that costs money.
A business owner who doesn't know the numbers might hire a new employee when there's no budget for it, or avoid an investment that could actually advance the business. They might keep selling a product that loses money because "it sells well," or give discounts to customers without understanding how it affects the bottom line.
These guesses add up. What looks like a small decision can turn into a hole in your budget, and what looks like savings can cost you opportunities.
Three numbers that will change the picture for you
You don't need to drown yourself in reports. There are three key metrics that if you track them regularly, you'll know exactly where your business stands.
How much money really comes in and goes out
Cash flow is not the same as profit. You can be profitable on paper and still be stuck without money in your account. Why? Because customers pay in 30 or 60 days, but suppliers want the money now.
Tracking weekly what comes in and goes out of your account will reveal problems before they explode. If you see that in two weeks you'll be in the red, you have time to act – collect a debt, postpone an expense, or close a deal.
Where the real profit comes from
Not every dollar that comes in is worth the same. There are profitable customers and there are customers who cost you more than they bring in. There are services that pay off and there are ones you offer just because "we've always offered them." When you know where the profit comes from, you can focus there. More of what works, less of what doesn't.
How much you need to bring in just to break even
Break-even is the number that shows how much you need to sell each month just to cover your expenses. Below that number – you're losing money. Above it – you're making money.
When you know your break-even point, you stop guessing whether the month was good or not. You simply know.
From guessing to planning
Once you know the numbers, something interesting happens: you start planning instead of reacting. Instead of discovering at the end of the month that there was a problem, you see it ahead and prevent it.
Financial planning sounds like something for big businesses, but in reality it's simple: decide in advance how much you want to bring in, how much you're willing to spend, and check every week if you're on track. If not – fix it immediately, don't wait until the end of the year. Businesses that plan ahead survive crises, identify opportunities, and expand at the right time. Businesses that guess – depend on luck.
The first step
You don't need to change everything in one day. Start with one thing: every week, look at your cash flow. How much came in, how much went out, how much is left. Just that. After a month of tracking, the picture will already be much clearer. This knowledge is worth everything. It's the difference between running a business and letting the business run you.