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5 Tips on How to Make Better Small Business Decisions

The key to making good decisions is good information.  So what information are you getting to help make important business decisions?  Here are 5 reports in addition to the basic accounting reports that you need to be looking at regularly. 

 #1 - Employee Activity Report - Do you know what your employees are doing in exchange for the money you are paying them each hour?  What activities are they supposed to be performing and how do you confirm that they are taking these actions?   One of the great benefits of technology is that it can tell you what your employees are doing in order to minimize your payroll expenses which is probably your largest expense.  Have your employees clock in and clock out on the POS System.  Get reports showing how many orders they processed.  Create a list of specific, weekly tasks and have them check off those tasks in a task management system. 

 #2 - Sales by hour and day - Did you have a good day or a bad day?  Well, there are two pieces of information you need in order to determine this.    First, you need some historical data which we will talk about next and you need to look at an hourly report.  It really isn't enough to say, "We had a good day!"  You might have had an incredible morning, an okay afternoon, and a terrible evening and that all averaged out to a good day.  If you were looking at hourly reports in real time using cloud based POS Solutions, you would realize this and change your payroll allocation.  You would say, "Wow, the last three Wednesday nights have been really slow, we don't need 4 cooks, we need 3, or we don't need 5 employees helping our retail customers, we could provide great service if 2 of them went home at 4pm instead of 8pm. 

#3 - Month over Month and Week over Week - At the end of each month, you want to look back, not at the previous month but the same month in the previous year.  If you compare December to November, you might conclude you had a great month in December or a terrible month in November.  The reality is that your November sales were up a little this year over last year but your Christmas shopping was down a little so in fact this information would show you that November was a good month and December was a bad month.  Again, this information is crucial when evaluating your business performance and making decisions. 

*Extra Tip - Create a weekly report that you get every Monday morning.  This report shows sales, payroll expenses, and other major income and expense categories for your business.  Compare these key metrics to the same week last year and then make some notes on this report like, "Snow storm on Thursday caused our sales to be down that day by $1,000" or "We got a large order from XYZ Client giving us an additional $4,000 in revenue."  After you have done this for one year, you can pull out the weekly report from one year ago and get a great idea of how you did the previous year for the same week and what challenges may have impacted the numbers. 

#4 - Sales by Product - It takes time, energy, focus, and capital to offer everything on your menu, on your shelf, or every service you provide.  Make sure you know which ones are worth that investment and which ones are not.  Even 
most of the basic point of sale systems today can give you this data so make sure you are inputting the correct data using bar codes or correct check out procedures.  You want to be looking at reports regularly that will give you the insight into what is making you money and what is causing unnecessary complexity and lack of focus. 

#5 - Profit by hour report - This report is not automatically generated and it takes some time to set it up but it is worth the time!  Start by calculating your fixed costs per hour.  In other words, how much does it cost for you to be open.  Take your rent, utilities, etc. and divide by the number of hours you are open each week.  Next, add variable costs like payroll for a particular hour each day.  Now, look at your revenue for that hour and take away cost of goods sold to get your net revenue.  Subtract your fixed and variable costs from your net revenue and answer a very important question.  Is there any hour each day when I am losing money?  If so, figure out how you can decrease costs primarily through payroll re-allocation or simply stay closed during that time if this makes sense. 

Some business owners who did this calculation over a period of time found that they were losing money from say 9 am to 11am Monday through Thursday.  So they simply don't open until 11am on those days and much of the revenue they would have received during those two hours will still come in later that day or later that week.  Many restaurant owners have found that they don't make money serving lunch, and all their profits are coming from dinner.  So they decided to focus on dinner and make that their niche or they found a way to reduce expenses or drive revenue through special lunch offers. 

Have a great day! 

Michael Whitlock