Do you know the budget of your company? By understanding the numbers, you can screw up and improve to build an attractive company for banks and stakeholders, but of course also to get a good result and make a profit on the last line. Here are 5 tips along the way!
Anders Abrahamson is originally an economist and business developer, but today one of two co-owners. Anders has extensive experience in streamlining and developing businesses and now he practices his knowledge in his own company. Here he shares his best tips to keep track of the numbers and see all the company’s possibilities.
Keep track of the budget in your company – Anders tips
1. Learn to interpret the numbers
Understand how the income statement and balance sheet and cash flow are related
Anders gives an example:
– We are investing at the moment and then it is important to keep track of both the balance sheet and earnings and ensure that all investments end up in the right balance sheet accounts and do not find their way into the income statement. We also need to have sufficient working capital, i.e. money for daily operations, to be able to pay for ingredients for production. Managing growth at the same time as day-to-day operations is difficult but necessary to be able to continue to grow.
– In a small company, the goal can be to get a positive result in the long run and you can have a long start-up time. Then the cash flow, i.e. the money you have access to in the account, is controlled so that you can pay for the investments you make and the purchases you need to make.
– When you look at the numbers, you see if it is possible to screw something up, how much money it will be over each month and how much the business generates.
2. Identify the key figures for your business
– The key figures for the business are that we want to build a well-functioning and profitable company, which is not only important for us but also our most important stakeholders, such as banks. and stakeholders. The key figures that we work with daily are not always the same as the key figures that banks and other investors look at, but they are always linked.
3. Identify the key figures for the daily work
What key figures are most important to you in your daily work?
– The margins are small in our industry and a lot is about keeping costs in check. Therefore, we work a lot with the key figure gross margin, which is what is left over when we have deducted the manufacturing costs from sales. It is a tough fight against the suppliers and we ask ourselves, for example, if we can find a cheaper packaging or carton? Raw material cost is another key figure we look at daily. How much do the ingredients for our beer cost and what can we do to reduce those costs without compromising on quality?
– Since we have a growing business, we also ask questions such as: What happens when we switch up? If we spend too much money on investments, the coffers run out, and then we do not have the money for necessary purchases. On the other hand, investments mean that we can get a better result in the future, so it is always a balancing act where you have to closely follow what happens when the company grows.
4. Find an experienced ballpark that knows your industry
Each industry is specific and you need a sounding board that can help you with key figures for your particular industry.
Anders gives an example:
– In each industry, there are more or less important key figures and here it can be good to have someone who has worked in the industry longer who can give tips and above all help to analyze your figures.
How do you manage your finances so that you can develop your results every month? Are there things that especially apply to your industry?
Tips! econs tuition
5. Take the time to learn how to analyze key figures
Take the time to learn key figure analysis. It’s not that complicated. You identify “your” key figures and compare, for example, gross margins and profit margins.
When you can identify and compare key figures, you can also see the possibilities in your own business. If, for example, you see that you can reduce cardboard costs by SEK 1 each, but that you then have to buy at least SEK 5,000, this means that you need larger working capital and that you may need to increase the check credit.
If you do not work like this but grow relatively fast, it becomes difficult. For example, we had a period when our overdraft facility shrank, which meant that it became difficult to handle purchases and to bridge from a calmer to a more hectic period when extra raw materials are needed while there is not much in the coffers. This gives problems even if I deliver a good result on an annual basis.