The Seven Key Numbers that Drive Profit and Cashflow

Sue Hirst and Stuart Frost have put together some “cut through” financial information to help SMEs better manage profit and cash flow.

They look in detail at these seven key numbers:

1. Revenue Growth Percentage

Selling more can actually make cash flow problems worse, because when you make a sale you need to “fund” that sale.

2. Price Change Percentage

Many small business owners think they can’t increase prices because they will lose customers, but if you don’t increase prices regularly, you will notice it when gross profit reduces.

3. Cost of Goods (COGs) Percentage

This “driver” is probably the most impactful. A small change here can have as much impact as a large increase in Revenue.

4. Overheads Percentage

Overheads can “eat away” at profitability if not kept in check. There’s one word for the solution here: budget!

5. Accounts Receivable Days

There’s many ways to get customers to pay on time and regular efficient follow-ups is one.

6. Accounts Payable Days

It’s common to see this number at less than the Accounts Receivable Days number  – resulting in a cash squeeze!

7. Inventory and Work in Progress Days

Think of Inventory as dollar bills piled up on the stock room floor, and Work in Progress as dollar bills piled up on the work room floor!

To order a copy of The Seven Key Numbers that Drive Profit and Cash Flow, email info@CFOonCall.com.au or call 1300 36 24 36.

The  free copy of The Seven Key Numbers that Drive Profit and Cashflow  was won by Peter Goss of Tanunda, South Australia.