Accounting Indicators to Be Aware of When Scaling Your Business
Owning a business is no simple job. It requires many resources as your business grows but also requires a great amount of research and knowledge as you scale your business. Knowing what to look for as you scale your business is key to success. But what exactly is scaling your business?
Scaling Your Business: What exactly does it mean?
In a nutshell, scaling your business means to grow your business strategically so that it can sustain in the test of time. Ideally, as the business grows and scales, the cost of doing business should not increase. Scaling means being capable enough to grow your business under the pressures of higher business stakeholder demand. As demand increases, so must your business capabilities and supply. Being able to keep up with supply while demand grows is key, but several key performance indicators must be taken into account as you scale your business. One of those such indicators is the accounting factors that must be taken into account when scaling your business.
Sales Growth and Marketing
You may not think that marketing has anything to do with scaling a business or with accounting, but it is directly related. To succeed in scaling your business, you need to have a marketing plan that corresponds to your sales plan.
Growing a business is directly related to scaling a business. One of the goals of sales growth and marketing is to increase sales as you increase your team. Your business needs to be able to keep up with the scaling you do. Therefore, marketing is directly related to the revenue your company or business brings in and thus Is a key factor to the accounting indicators when scaling your business.
Cash Flow and Projections
Cash flow is what it sounds like: the cash produced by your business vs. money outspent by your business. Ideally, you want your cash flow to be higher. Before you scale your business, you should know whether your business is operating at a profit or a loss.
Once you know whether your business has been operating at a profit or loss, then you can calculate projections for your business. Determine how much your business is scheduled to take in over weeks, months, quarters, and years and determine if that is enough cash flow to sustain the business over time. If it is not, then you may not be ready to scale your business.
Profit and Loss Statements
Before deciding to scale your business, you must take a look at your profit and loss statements. Profit and loss are revenues, costs, and expenses and is a key accounting indicator of how profitable your business is. A business that is not running a steady profit may not be ready to scale up. This statement is also called the income statement because it summarizes, usually by quarter, how much income a company takes in after expenses and costs are calculated.
In sum, several accounting factors must be considered before you decide to scale a business. If you decide to scale too soon, your business may not stand the test of time. If you decide to scale too late, you may be run over by your competition. Successful business scaling is directly related to how healthy the business is from several accounting indicators listed above.