Benchmarking your Business

If you get regular financial reports it is easy to track how much profit (or loss) you are making. But what else can these reports tell you?

Armed with a simple P&L statement and a balance sheet, you can actually learn a great deal about the health of your business.  One of the easiest ways to do this, is to use financial ratios.

These ratios help you identify trends in your business, and work out your businesses strengths and weaknesses.

You can find out, for example, if your debt ratio is increasing or decreasing, if your debtors are paying you on time, and what your stock turnover is like.  By reviewing these ratios regularly, over time you will start to see the big picture of how your business is performing.

At Imprest, we love to make it easy for small business owners to track the health of their business.  We can create custom reports incorporating financial ratios and comparative anaysis's.  What our clients really like though, is that we take to the time to explain what the reports mean and how you can use them to analyse your businesses performance.

One thing we always stress though, is that there is no need to "go it alone".  Once you have the tools to analyse your business, your accountant can really shine and help come up with proactive strategies to meet whatever your financial challenges are!

The ANZ bank has some online ratio calculators which you can use for free. They also have a great benchmarking tool, which allows you to compare your business ratios with similar businesses in your industry type.  If you want to check out how your business stacks up, visit them here.

ANZ’s range of ratio calculators includes the following:

Debt ratios

• Debt ratio
• Debt to income ratio
• Interest cover

Profitability Ratios

• Net profit margin
• Gross profit margin
• Return on assets
• Operating expenses to sales
• Sales per employee

Liquidity Ratios

• Working capital
• Quick assets ratio
• Stock turnover
• Debtor ageing ratio
• Creditor ageing ratio