Simple Business Dashboard – Free Ingredients plus Download
Make really Profitable decisions use these 8 Key Business Indicators
Imagine if you had two pages with graphs and charts of your SME information and insights, in front of you right now… How much difference could that make to your profit this year?
Just because you’re an SME, and don’t have large in-house IT department or a big consulting budget, don’t let that prevent you from getting the right information, at the right time. Grab your most recent Income Statement and Balance Sheet (for Aussies this will be available from your last BAS workings), then set-up your own Simple Business Dashboard using these 8 really easy stats so you can start making informed decisions and taking action to build a better, stronger business.
As you regularly measure, monitor, and see your own business trends progress on your dashboard – you are converting your financials into GOLD.
Step 1 – make sure your basics are up to scratch
The Extra Basic – Tidy up your Accounts
Regardless of how you do your accounting, having accurate Profit & Loss and Balance Sheet Reports is imperative to profitable decision making. Ensure every dollar and activity is found, and recorded, accurately. If you put rubbish into your Accounts, only rubbish can come out on your Dashboard. (Or as the saying goes, ‘Garbage In, Garbage Out!’). So we are starting by assuming your business systems are currently processing accurate and timely data. (If not start by fixing up that part quick!)
The Basic – Understand your Expenses
Unless you sell services – for your new Dashboard to work best your Income Statement needs to specify Direct and Indirect costs separately. Just in case this needs some clarification:
Direct Costs (also called: Cost of Goods Sold or COGS)
The term “direct” describes the relationship of these costs to goods produced and/or sales made – the concept is that there is a “direct” correlation between a sales and this cost. This may not be on an exact 1:1 relationship (1 more unit sold = 1 more unit of cost). Consider a tele-sales business re-selling steak-knives for a profit. For every sale there is the direct cost of the steak knives and the cost of the shipping.
Direct Expenses usually only appear in Income Statements of businesses which are manufactures or retailers – supplying stock – and refers to expenses such as raw materials, inventory, delivery etc. Service businesses generally do not allocate any specific costs to Direct Expenses as they cannot hold, nor sell, their staff as “stock”.
Indirect Costs (also called: Operating Costs, General Costs, Overhead costs, Overheads)
Indirect Costs are incurred to keep the business running; all the overheads and support functions that need to be paid for regardless of whether you have customers or not. This typically includes salaries and wages of staff, marketing and advertising, stationery, rents, electricity etc. There is no exact correlation between an increase in sales and an increase in these expenses – i.e. for every extra unit sold, there is not an obviously corresponding extra unit of cost in this area.
If you do sell services your business is unlikely to have direct costs, so all of your costs will be indirect – Check with your accountant or Bookkeeper if you are unsure and for more information see this previous post- Costs Explained