When I look at the statements for my bookkeeping company every month, I’m looking for several things:
Did I make a profit? In a service business, you should pretty much expect to make a profit from the get go.
What’s my gross margin*? For a service business, I like to see between 40-60%. Some business like grocery may have a margin of 3% – 0.03 of every dollar goes to pay for the store, the staff, advertising etc. They need volume.
Is my overhead steady month to month? I’m keeping an eye on expense creep. I’m also making sure we aren’t trying to shrink our way to greatness.
Are my receivables reasonable? This will be on my balance sheet.
How much do I owe in the short term for payables and taxes? I rigorously maintain a cash flow spreadsheet. I want to plug in the numbers as soon as I know them. I’ve been in business long enough to know approximately how much is coming in and how much is going out. I may not know the particulars for the month after next, but I have a pretty good idea about how it will play.
Gross margin is second for me right now because I’ve hired 2 people at once, both with more experience (and more pay) than I’m used to. I want to pay them well and I need to continue to make a profit, so I’m watching this number carefully.
*Gross Margin is the percentage of every dollar of sales left after paying Cost of Goods Sold.
There are 2 kinds of expenses in your business: selling/production (aka Cost of Goods Sold) and overhead. The Selling/production expenses are what it costs you to produce and sell each unit. You should be able to make a direct link from the cost to a particular sale.
That’s what I look for now. Sometimes I’ll follow other numbers depending upon what is important at the time. What numbers are important in your business?