Vlad Rusz, a CPA at Centaur Digital Corp, helps business owners efficiently manage their accounting systems. Business owners often overengineer their accounting, leading to an overwhelming amount of data that can make decision-making difficult. To distill this information into actionable data, business owners can rely on key performance indicators (KPIs) to quickly identify relevant information.
For small businesses with less than $500,000 in sales and no external investors, tracking sales and cash flow is crucial. Sales are the lifeblood of a small business, directly impacting profitability and fulfillment. Cash flow, on the other hand, reflects the amount of cash the business receives or uses in a certain period, which is important for understanding the financial health of the business.
Sales and cash flow are essential KPIs that can easily be calculated without a bookkeeping system, making them accessible for business owners to track on their own. While profit is often considered the benchmark for business success, cash flow can provide a more accurate picture of the financial situation, especially for small businesses. It’s possible to run a business successfully without an accountant or bookkeeping software, but proper financial management becomes more critical as the business grows and becomes more complex.
As the business grows, relying solely on sales and cash flow as KPIs may become insufficient. However, at that point, the business should be profitable enough to afford a well-developed bookkeeping system. It’s important for business owners to understand the relevance and importance of tracking key financial indicators to make informed decisions and drive business growth.
The information provided in the article is not investment, tax, or financial advice, and business owners should consult with a licensed professional for guidance on their specific situation. The Forbes Finance Council, an invitation-only organization for executives in successful accounting, financial planning, and wealth management firms, offers a platform for professionals to share insights and expertise in the financial industry.
