Business owners and managers often become short-sighted and focus too heavily on daily and weekly key metrics. While these are crucial to success, longer-range metrics also need to be consistently reviewed and managed to maintain successful operations. Quarterly employee reviews and a yearly post mortem are examples of bigger-picture factors that need your attention. However, monthly profit-and-loss statements (P&Ls) need to be analyzed in detail at least once a month to ensure that you understand where your money is going. You should be using bookkeeping software, such as QuickBooks, from day one of operations in order to have these numbers handy.
The following benchmarks are a good start to effective P&L reviews:
- Scrutinize every line, every month.
- Use bookkeeping software for accuracy and convenience.
- Hire an outsourced bookkeeper when you reach revenue of $10,000 per month.
- Hire an in-house accountant when you reach $100,000 per month.
Adapted from: Tribby, Maryellen. Reinventing the Entrepreneur: Turning your Dream Business into a Reality. Hoboken, NJ: John Wiley & Sons, 2013. 239. Print.