business finance options Archives | Numbers Knowhow

Knowing Your Costs – The Key To Any Business

Mahmood Reza — Mon, 25 Sep 2023 10:46:37 +0000

Running a business means setting clear goals that you would like to achieve as a business owner. Whether that is to provide services or manufacture products, you must have a defined target and strive to reach it. Certainly, one of your goals should be making money i.e making a profit, since there is no future in a business that is repetitively not profitable. Focusing merely on the sales you are generating won’t give you the full picture. Hence, the way to success and money is through knowing your costs. In this blog, I am going to explain the different types of costs and how they behave in different circumstances. The importance of knowing your costs The sales that you make are not your profit in the business precisely because of the costs you have. Once the end customer has paid you for the product or service that you offer, the money you receive needs to cover the expenses that you encountered in the process of production. Now, these expenses are what I call costs. By knowing your costs, you will know what you are left with from the sales. In other words, you will know how much of your […]

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Gross Profit & Net Profit: What Is The Difference?

Mahmood Reza — Fri, 19 May 2023 09:33:22 +0000

Making as many sales as possible is the goal of every business. Whichever service you offer to your customers, that is going to be what you’re aiming for. However, what really lies behind a successful business story is the profit generated from these sales. In this week’s blog, we will go one step further and look at two types of profit you would typically encounter, gross profit and net profit. What exactly does gross and net profit mean? What’s that all about? Gross profit Gross profit in business terms is the profit made once you deduce the costs the business has incurred for manufacturing the goods and/or providing the services. An easy way to grasp the meaning of it is through examples. For example, Maggie sells homemade biscuits outside her house at 50 pence a biscuit. Now, if she sells a hundred of those, then she ends up with £50. Those £50 are her sales, but it’s not her profit. Maggie needs to spend £10 first for flour, eggs, and sugar. She reckons this will be enough to make a hundred biscuits all in all. This means that she gets a £40 profit. Those £40 are her gross profit. Here […]

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The Difference Between Budget & Budgeting – A Beginner’s Guide

Mahmood Reza — Fri, 19 May 2023 09:16:58 +0000

We’re all on a budget, and I bet we’ve all done budgeting in one way or another. But, before we go into comparing the two, we need to clarify what a budget is. What is a budget? It’s really a plan for spending the money you have or the money you expect to have over a certain period. When it comes to businesses, it’s usually an annual one. When we say that something is in our budget, we actually mean that we have the necessary funds and we can spend them on whatever it is we’ve planned for our business. On the other hand, if it is over it, it means that we’ve not planned for such an expense, and we can’t afford to make a certain purchase. Types of spending plans They can be personal or corporate. This means that both households and companies use them. Hence, the very first sentence of this blog. Personal When you know how much money you have and what portion of it you spend on all your monthly expenses, it will be much easier to stay on top of your finances. These calculations are usually done on a monthly basis. Following a […]

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Why Planning Is Good For Business

Mahmood Reza — Mon, 17 Apr 2023 08:05:10 +0000

Planning is an essential process for any business, regardless of its size or industry. It involves setting objectives, developing strategies, and laying out the actions needed to achieve them. Remember if you want your business to be successful, you need to get to grips with it. Don’t think “Oh no!” and glaze your eyes over. You really do need to plan, so read on. Why plan for business? Planning relieves anxiety. In other words, it relieves all that not knowing what’s gonna happen the next day. You’ve got anticipation about the way your business is going to move forward and you do need to move forward. Because if you don’t plan, your business will be going backwards. Stress relief, making money, having the business that you deserve and want… These are the reasons why you should be thinking about planning. It’s not boring, it’s essential. Above all, it shows how you can turn your business into a reality. Write your business plan or it may be hard for you to survive and prosper. So, if you want your business to make money then start putting one together. Planning enables clear direction It provides a clear direction and it helps […]

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Why Is Cash Flow Planning For Business Important?

Mahmood Reza — Thu, 07 Jul 2022 21:46:27 +0000

Cash flow forecasts or cash flow planning for startup businesses, for example, has to do with estimating or forecasting your likely future sales and expenses. But why is cash flow for business important? Well, cash flow planning, no matter what kind of business you’re running, is an absolutely vital business tool as it indicates whether you have enough cash to sustain your business and grow it. Even a simple cash flow forecast template in Excel can easily show whether more cash is going out of the business than coming into it. Why Is Cash Flow Planning for Business important? Using the example above, a cash flow forecast allows businesses to track the estimated or expected cash movements over a specific timeframe in the future. However, it pays to understand that a business’s profit at any given month end is not a true reflection of how much money is coming into it as revenue. How do you get a proper cash flow forecast. Well, use paper, spreadsheet or have your accountant it for you!. Using Numbers Know How makes it possible to estimate the amount of ‘money in hand’ you have at any moment in time. Similarly, if you take into […]

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Financial Planning For Small Business

Mahmood Reza — Wed, 06 Jul 2022 20:17:16 +0000

Speak to any business owner and they will tell you that long-term success is their goal. In order to get there, it takes preparation and planning which is where financial planning for small business is vital. It enables you to deal with investors, plan for growth and manage cash flow at the same time. What is a Financial Plan? A financial plan will enable you to determine whether an idea is feasible. It will then ensure you remain on track when it comes to financial health as your business grows. It will form an integral part of your business plan and consists of three financial statements. This includes a cash flow statement, income statement and balance sheet. So, if you are wondering how to create a financial plan then there are four steps that you should follow. Develop a Strategic Plan This is crucial as a strategic plan will give you an idea about what you want to achieve with your business. Before you start considering your figures, you should have a think about what is required to meet your goals. Will you need more staff? Will you need more equipment? Is your cash flow going to be affected […]

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