Spreadsheets You Should Have as a Small Business Owner
As an accountant, I can personally tell you that spreadsheets are one of the most useful tools for running a business. In my opinion, every business owner should be maintaining a number of spreadsheets in Microsoft Excel or Google Sheets to keep track of key data and perform analysis. Today, I’m going to share with you three of the most important spreadsheets that you, the small business owner, should maintain while running their business.
Spreadsheet #1 - Expense Budgets
The expense budget is my #1 spreadsheet for small businesses because small businesses will live or die by their cash flow. Especially when the business is in its early years, it is far easier to cut down on expenses than it is to increase income to maintain cash flow. Business owners need a place to keep track of the expected expenses for their business for the upcoming month so that they can make informed decisions on what costs to cut if necessary. There are many owners that simply have too much going on with their business that just don’t keep track of all the smaller expenses that can really add up to affect their bottom line. By having an expense budget spreadsheet, you can more efficiently keep an eye on expenses without having information slip through the cracks.
Spreadsheet #2 - Financial Models
Financial models allow you to ask and answer questions such as:
What would happen if I had more customers?
How many customers do I need to break even at a certain price point?
How many customers do I need to make $6,000 in sales for the month at a certain price point?
How many customers do I need to make $6,000 of net income for the month at a certain price point?
Should I make and sell merchandise at a certain price point if 20 people will buy it?
Financial models allow owners to translate scenarios into practical goals that can be broken down into actionable steps. For example, if you wanted to take home $1,000 at the end of the month after paying all expenses, a model could tell you that you will need 17 total clients, which you could then set as a goal so you can reach that financial benchmark. The best thing about spreadsheets is that you can run these models using multiple different assumptions and see how changing those assumptions changes the result of the model. A great example of this is when a small business uses a simple model to determine if it is a good idea to raise prices by changing the modeled price and number of customers after the price change. Once you get good at the basic models, you can layer in other assumptions and restrictions such as the capacity of clients to make for a more detailed analysis.
Spreadsheet #3 - Business Specific KPI Data
Every business has Key Performance Indicators (KPIs). These are critical indicators of progress towards an intended result that can be used as metrics to help improve strategic and operational performance of a business. Every business will have financial indicators such as total revenues, total expenses, revenues per customer, etc. On top of those, there are nonfinancial KPIs that can relate to the general operation of the business. These can include the number of customers served, downtime recorded, number of social media posts made, social media engagement, conversion rate on sales calls, and many more. By figuring out what metrics may be important and keeping them in a spreadsheet, you will be able to track and analyze how the business is progressing and performing.
Spreadsheets are an incredible tool for operating a business and while these three sheets I listed above are important, there are many more that you can customize and utilize to make your business better. Once you have the basics down, you can move on to linking data between massive spreadsheets and creating dashboards that automatically chart all the key information. What are you waiting for? Go get started!