Feeling pretty jazzed about his business, a friend of mine, Steve, went to the bank to get a loan to expand his business.
During a meeting with the banker, he shared his numbers, pretty certain he was in good shape to get the loan. The banker had a different point of view. She thought my friend was going to go out of business within 3 months based on the story his numbers told!
Numbers tell stories. Do your numbers tell the same story about your business that you would tell? If the answer is “No,” there are only two reasons: either you are wrong or your numbers are wrong.
To assess the quality of your books, you need about 30 seconds to review the profit and loss statements to see if you can quickly identify your top line, your bottom line, and your gross margin.
The basic terms of your profit & loss statement
Top line = the amount of revenue your company brings in.
Bottom line = what you have after you pay expenses.
Gross profit = the money you make on each “items” or “services” after the cost of delivering those is subtracted out. Easy if your company sells a widget – the cost of the widget needs to subtract out. A little more involved for agencies and firms – you’ll have to take out any expense you’ve paid on behalf of your clients and outside contractor costs.
If you can’t find these numbers, you need to, Contact Us right away!