3 Essential Numbers Every Retail and Construction Business Should Track Monthly
Every business faces its own unique stresses. Some might struggle with overwhelming customer demand, while others deal with inventory shortages or challenges in managing cash flow. Many also grapple with accounts receivable issues. When you examine these stressors more closely, you’ll often find that they are reflected in your financial reports.
But while it makes sense to tackle these stressors by keeping an eye on our financial reports, some business owners feel anxious doing them. Instead of feeling confident and in control, some business owners feel a pit in their stomachs – afraid of what the data might show.
And because that fear can be overwhelming, they find it more comforting to live in the dark and only look at their financial reporting when their accountant prepares the financial statements at the end of each fiscal year. Unfortunately, avoiding our numbers is only causing us more harm than good because what they don’t realize is that these monthly or quarterly financial reports are actually what helps you make your business more successful.
On a brighter note, the numbers you’ll get on your financial reports are not permanent — you can still do something to improve or change them. By understanding your financial reports, you will be able to make better decisions in your business, and ultimately alleviate the stress you feel about your numbers – altogether.
In this blog, we’ll help you figure that out as we break down three key numbers that every retail and construction business owner should focus on for you to confidently take control of your finances.
Why Fear of Financials Holds Business Owners Back
When it comes to managing a successful retail or construction business, understanding your financial numbers is key. Yet, many owners grapple with a significant hurdle: fear of finances.
For many business owners, this fear often stems from a lack of financial knowledge and an overwhelming sense of confusion over accounting terms and reports. It’s easy to feel uncertain about where to start or what the numbers truly mean, which can lead to anxiety about potentially discovering that things aren’t going as well as hoped.
However, avoiding financial reports doesn’t make the problems go away instead, it results in missed opportunities for growth and unexpected cash flow issues. When you shy away from these critical insights, you risk losing track of what could help streamline operations and avoid unnecessary expenses. Ignoring your numbers is often what leads businesses to serious financial mismanagement, leaving you in a tight spot down the line.
Luckily, knowing your key financial numbers can help dispel that fear and provide clarity. By focusing on the right metrics and reviewing them regularly, you empower yourself to make informed, proactive decisions. Eventually, you’ll realize that this approach is what helps you tackle potential problems head-on before they snowball into even larger issues.
What Are The 3 Numbers You Should Be Tracking Monthly?
Tracking your numbers is an important step every business should take, but it can be confusing to figure out which ones really matter. To help clarify that for you, here are three essential numbers you can start monitoring closely:
Cash Flow and Bank Balance
Understanding your cash flow and current bank balance is a must for keeping your operations running smoothly, planning for future expenses, and ensuring you can pay your bills on time. A healthy cash flow provides the liquidity needed to cover short-term expenses without relying on credit or loans.
To achieve that, you need to have a solid understanding of the recurring transactions that are coming in, and going out, along with any large transactions going out.
For example, in a retail environment you may have a quarterly HST payment that is typically normally around 15k. You may also have a bi-weekly payroll of roughly 12k, along with a monthly rent payment of 6k. For sales, you generally have 2-3k coming in daily. You can build a very simple spreadsheet that will account for these larger expenses, and daily sales, giving you a solid understanding of your cash-flow and potential shortfalls.
Having a firm grasp of your cash flow helps eliminate a lot of the uncertainty surrounding your day-to-day operations. This clarity is what gives you greater peace of mind, as you learn to anticipate potential cash shortages, giving you ample time to take proactive measures before issues arise.
Accounts Receivable and Payment Terms
Keeping a close eye on your accounts receivable is essential for maintaining healthy cash flow. That’s because knowing how much money your clients owe you and how overdue those payments are helps you avoid potential cash flow issues. This is especially true for construction businesses as slow-paying customers can make the difference between thriving financially and facing a cash crunch.
To effectively manage accounts receivable, it’s important to monitor aging reports, which reveal overdue invoices and the average days outstanding for each customer. This information allows you to identify which clients need a nudge and what appropriate action can be done about it—whether that means renegotiating payment terms or simply reaching out to remind payment.
Liabilities (Debt, Loans, Taxes, and Other Obligations)
Another aspect you should be looking closely into is your liabilities. Keeping track of these is important to ensure your business can meet its financial obligations without getting into hot water, especially if you have existing debts or outstanding tax payments.
For instance, if you see you have $50k in your business bank, $30k in sales tax liability, and $10k in credit card payments due this week, you know that leaves you with $10k once everything is paid. This kind of clarity ensures you don’t get blindsided by unexpected payments or cash shortages.
Monitoring key metrics like loan balances, sales tax liabilities, credit card payments, and other recurring obligations helps you stay on top of your financial commitments. When you regularly check in on these numbers, you can plan ahead for upcoming payments, dodge late fees, and make smart choices about taking on more debt. Plus, having a clear understanding of what you owe means no surprises when it’s time to pay up, which also helps alleviate the stress that comes from unexpected payments.
Best Way To Track These Numbers
To easily keep track of the essential financial numbers for your retail or construction business, here are some of the best ways to stay on top of things:
Use Accounting Software
Tools like Xero and DEXT can make managing your business finances way easier. They can help you automate the posting of your expenses, send invoices, monitor overdue payments, and generate detailed financial reports.
Accounting softwares are designed to keep all of your financial information in one place—from keeping an eye on your accounts receivable to helping you meet your tax obligations. Instead of manually sorting through receipts and spreadsheets, accounting software pulls it all together in real-time, giving you an accurate snapshot of where your business stands.
Create Monthly Reports
Dedicate a specific time each month to review your financials in detail. This practice goes beyond just glancing at your bank balance. It means diving into your financial reports to see how money is moving in and out of your business, checking your accounts receivable to track payments due from customers, and looking at your liabilities, like debts or upcoming taxes.
When you consistently generate these monthly reports, you get a much clearer picture of how your business is performing and can spot potential problems early—like slow-paying clients or looming bills that might catch you off guard. Over time, this will build your confidence in making strategic financial decisions, instead of guessing or reacting to sudden surprises.
Track Cash Flow with a Simple Spreadsheet
For those who prefer a more hands-on approach or aren’t ready to commit to accounting software, a spreadsheet can be your best friend. Tracking your cash flow manually gives you a customized view of your business’s finances.
You can set up a simple template that shows your income and expenses on a weekly or monthly basis, helping you see trends in spending, identify gaps, and plan ahead for any upcoming shortfalls. Plus, this method makes you more aware of the small details that sometimes get lost in automated reports.
Set Payment Reminders
Keeping track of when payments are due can also prevent late fees and other unnecessary costs. You can use digital tools, calendar apps, or even software to set up automatic reminders for bill payments, upcoming tax deadlines, or following up on overdue invoices.
This ensures you always know what’s around the corner, and you’re never caught off guard by unexpected financial obligations. Timely payments likewise help build better relationships with suppliers and lenders, which could come in handy if you need favourable terms in the future.
Hire a Professional Bookkeeper
Bringing in an expert, especially through outsourcing, can be a huge relief. Bookkeepers are trained to handle everything from daily financial tracking to preparing your books for tax season. They take the burden off your shoulders, ensuring that your numbers are accurate and up to date.
This allows you to focus on running your business, knowing that someone else is keeping a close eye on your finances. Plus, hiring a bookkeeper means you’ll have someone to answer financial questions and offer advice if things start to look uncertain—helping you avoid costly mistakes.
It’s Time to Take Charge of Your Numbers
Fear doesn’t have to control how you approach your numbers. The more you track and understand your finances, the less intimidating they’ll become—and the more empowered you’ll feel to run a successful business.
In fact, reviewing your financial reports regularly shouldn’t be a stressful process—it should give you clarity on where your business stands and what steps to take next, whether it’s making adjustments or sticking to what’s working.
Remember, tracking your finances doesn’t have to be hard when you can rely on experts like us at eGO Bookkeeping to guide you. We’re here to make it easier for you to stay on top of your numbers, helping you feel more confident and empowered in running your business. If you’re ready to take charge of your finances, reach out to us for a quote and learn more about how partnering with eGO can help you keep your retail or construction business thriving.