"Numbers never lie."
It's a phrase you've undoubtedly heard at one point or another in your life, especially as it relates to business. Well guess what? It's pretty much tried and true. Numbers are the lifeblood of your business; they're how you measure growth, success, failures, progress... everything. Numbers are your gut's foil. (Yes you just read the phrase "gut's foil" on an accounting software blog.)
Even though we accept "numbers never lie" as gospel, many small business owners (who, in fact, may not be what you'd call "numbers people") don't know where to start when it comes to understanding which numbers are the most important to be cognizant of and focus on. So that's what we're going to focus on here: the numbers that your business' health depends on.
The net income figure tells you exactly how profitable (or unprofitable) your business is. It's "income minus the cost of goods sold (COGS), expenses and taxes for an accounting period." Net income is also known as the bottom line and is, in fact, the bottom line of your profit and loss report.
Your balance sheet will give you a clear picture of your business' overall financial health for a specific point in time. It allows you to see your current assets as well as pending liabilities. This is critical information for a number of reasons, the least of which is that knowing what your assets and liabilities look like will help you anticipate what's coming and plan smarter.
In simple terms, cash flow is money in against money out. Revenue against expenses. If revenue is greater than expenses, you have positive cash flow. If the opposite is true, you have negative cash flow. It goes without saying that you typically want positive cash flow for your business. In Kashoo, you can use the Unpaid Bills and Unpaid Invoices reports to instantly see who owes you (and how much) as well as what you owe.
Think of your general ledger as your permanent record. In Kashoo (and in any accounting app), the general ledger catalogs and reports on every financial transaction your business has ever conducted. It is the source of information for the most common financial reports: P&L/Income Statement, Balance Sheet, AP/AR, etc. Keeping an accurate general ledger powers accurate financial reports.
While different types of businesses sometime require specific reports, these numbers are universally important. So to recap the above:
- Keep an accurate general ledger.
- Examine your cash flow on a regular basis.
- Compare your assets against your liabilities in a balance sheet.
- Know your company's net income.
Luckily, you can do all of these things—and subsequently know your business' financial health—in just a few taps or clicks with Kashoo.