Where would we be without data? Are you often wondering what data you should be paying attention to, and what KPIs or metrics should you be tracking? There are numbers that give you safety and those are the numbers you’re drawn towards. Then there’s also data that can be challenging and frustrating. And so you end up not dealing with those kinds of numbers.
There are so many pieces to financials and financial numbers, and the things that impact those numbers. We do understand that it can be very daunting and overwhelming. But you also have to understand that you have to know your numbers. You've got to fall in love with data without judging yourself in the process of it.
The importance of having a financial scorecard
One thing we learned about financial scorecards, and what we try to support our clients with, is there is the profit side, the tax side, then there's just the cash flow side to your numbers. There are so many pieces to financials and financial numbers and things that impact those numbers that can be very daunting and overwhelming.
A lot of times with businesses, they might have the marketing nailed down or they've got their sales nailed down, or maybe they've got their fulfillment pieces nailed down. But for whatever reason, if they have any kind of trauma, baggage, concerns, issues, or a lack of understanding, and it feels one ounce of hard, then it's really easy to just say, I'll deal with the numbers later when I have to file my taxes.
A financial scorecard is supposed to start helping you get confidence in your business. The more confident you can be about what's happening, the more you can start to predict.
Weekly numbers you need to look at
Once a week, there should be some numbers you take a look at and you have to make sure the number can be tracked weekly. Inside The Bottom Line® we have a leadership scorecard that we pay attention to, and we have four metrics or scorecard items on that weekly that we take a look at as a leadership team.
The main purpose of tracking data on a scorecard is if you're staying on track and if you are off track, there's something that you need to discuss because it's going to have a big impact in the business.
The importance of cash flow balance
You do need to understand access to cash and actual cash flow. And there's a process to that. But if you don't have good books and you don't have good accounting and cash flow is like one of those things that happened after the foundation's built, then you cannot deal with cash flow while you're trying to get a grip on your numbers.
The problem is, when you have to deal with cash flow, it's urgent, then it's almost like you have to create the whole thing at the same time. So that's why we love to get in with clients early and get those foundations built. So for cash flow, you have to pay attention to what your number is.
We also like to understand what's the most important and most meaningful thing you need to do in the season of your business right now? If you aren't doing cash flow right now, even when you have money, you could get into those seasons of investment and spend way more money than you intended to in those seasons.
If you want to learn more about growing your financial scorecard, check out Episode 102: Establishing Financial Scorecards to Build & Grow Your Financial Confidence.