Keeping Tabs On Your Business Numbers

Barbara Weltman

You can’t run a business on good intentions and hard work alone. You need to stay on top of critical financial information to see that your business is fiscally healthy and learn where changes need to be made in order to grow. Here are the numbers you need to watch, as well as why and how to do it.

Balance sheet

This is a record of your company’s assets and liabilities, which is the net worth statement of your business at a given point in time. At a minimum, a business should have a balance sheet at the end of its year. The amount by which your assets exceed liabilities reflects the owner equity. (In a corporation this is called shareholder equity.)

The balance sheet is important because it displays the financial position of the company. If assets are substantially greater than liabilities, the company is in a good position, but if liabilities are more, the company may be in trouble.

Profit and loss statement

The P&L statement, also called an income statement, displays the income and expenses of a company on a month-by-month basis. Income is the company’s fees, revenues from sales, and other types of income. Expenses usually are grouped into two categories: fixed and variable.

  • Fixed expenses, which are the same each month, include rent or mortgage payments and property taxes, salaries, insurance premiums, and utilities (even though costs may vary slightly month to month).
  • Variable expenses include advertising and marketing expenses, commissions, cost of materials for creating inventory, travel and entertainment costs.

The P&L statement shows whether the company is making a profit or experiencing losses. By looking over the P&L statement, you can see whether revenues are growing or declining. You can also work to reduce variable expenses in order to favorably impact profits.

LinkTech, a fast-growing IT services provider, found it increasingly difficult to gain visibility into their operations and financials. Their custom-designed financial applications and spreadsheets were a very manual process and nothing was integrated. It was a challenge to run reports they needed to understand the entire business. Now using digital technology, they easily manage profitability and cash flow giving the company more confidence to expand and grow.

Cash flow statement

Cash flow reflects the stream of money in and out of the business: “in” through revenues and other income and “out” through the payment of expenses.

Monitoring cash flow is critical to business survival. The issue with cash flow is having adequate funds on hand to pay bills when they come due, and revenues may not necessarily match this requirement.

Brazilian entertainment company, Cia dos Palhacos, was looking for a single solution to help run their entire business administration needs. They found a technology solution that was easy to implement and easy to use, providing the added control to their cash flow they were looking for. Now they can monitor their business finances, and have the ability to plan more efficiently for the future.

Cost of goods sold

If your business maintains inventory, you should watch your cost of goods sold (COGS), which is the costs for creating a product or acquiring items for sale. It is opening inventory (what’s on hand at the start of the year), increased for purchases throughout the year and reduced by goods sold, to arrive at ending inventory.

Tracking COGS is mandatory for tax reporting purposes. But it’s also essential to the computation of gross profits, explained later.

How to track your numbers

In the old days, a paper ledger was used by businesses to record their financial activities. Then the owner, or a CPA, controller, or other numbers person would assemble the numbers into the needed financial statements to determine how things were going. All that has changed.

Today, you only need to use a single point of entry for financial data and, with simple keystrokes, create the needed financial statements, ratios, and, other vital numbers for your review. Even better, today’s technology enables you to not only view but also help analyze what’s going on. Easily compute key ratios to assess fiscal well-being and use charts and graphs to take a long view of your company’s operations.

Here’s a list of some key figures that technology can help you compute for your review:

  • Current ratio compares assets to liabilities.
  • EBITA, which stands for earnings before interest, taxes, depreciation, and amortization.
  • Gross profit is the money remaining from revenue (reduced by COGS) after subtracting direct costs of sales. It can be expressed as a percentage called gross profit percentage or margin.
  • Net income is the bottom line for your business, reflecting all of the costs (direct costs, taxes, interest, etc.) to earn it.
  • Quick ratio is cash plus accounts receivable divided by accounts receivable, which indicates the amount of cash on hand to pay bills.

ArcLight Cinema operates movie theaters across the United States. Their internal systems for managing ordering and receiving were holding them back from expanding. They found a software solution that provides better integration with their POS system for tracking  their restaurant, concession stands, and movie ticket sales and gives them reliable data on their inventory available at their fingertips. They can now focus on the customer experience to ensure people keep coming back to their theaters.

When to review your numbers

Once the data is logged, it’s up to you to regularly review the information. The frequency depends on the type of data you’re looking at as well as your business needs. For example, you may only need to look at your P&L statement on a monthly basis, and your balance sheet even less frequently. However, you should be tracking your cash flow at least once a week if not more often.


As a business owner, you don’t have to become an accountant to understand and analyze your numbers. You can use technology to translate your raw data into information that you can use to grow your business. Remember, if you want to raise capital or take out a loan, having organized financial data will be critical for doing so. Solid data, along with quick access to that data, will give financiers the confidence to provide you with the capital you need to compete and grow. And again, technology is an essential tool toward that end.

Building a successful company is hard work. SAP’s affordable solutions for small and midsize companies are designed to make it easier. Easy to install and use, run all aspects your company with SAP software – on-premise or in the cloud. For key insights into the ways CFOs are transforming their departments to address their companies’ changing needs, read the CFO Research Report, “Embracing the Promise of a Digital Economy.” As more than 250,000 small and midsize companies have discovered, you’ll never outgrow SAP – no matter where your business takes you. 


Barbara Weltman

About Barbara Weltman

Barbara Weltman has been a premier consultant for small businesses of every kind for over twenty years. She’s written numerous books on small business operations, including J.K. Lasser’s Small Business Taxes, The Complete Idiot’s Guide to Starting a Home-Based Business, and The Rational Guide to Building Small Business Credit. Follow Barbara on Twitter @BarbaraWeltman


SMB Innovation: Why Successful CFOs Are Endorsing A Digital Strategy

Richard McLean

Day by day, business is becoming increasingly digital. Within small and midsize businesses (SMBs), digital technology is accelerating finance cycle times, presenting instant insight into business data, and improving strategic decisions. It’s leveling the playing field among competitors on a global scale. In my experience, SMBs that embrace digital innovation are in a better position to adapt to an ever-changing business reality. Those that remain mired in traditional processes risk losing market share to their more agile competitors.

As a finance leader of an SMB, how can you help the business get on the right side of the digital divide? My best advice is to work with the organization to recognize the urgency and value of digital transformation.

Overcoming the obstacles

Among the many hats you wear, strategic adviser is one of them. You have insight into the market, the competition, company finances, and resources. You’re in a unique role to influence how aggressively your company pursues digital transformation, and you can weigh the pros and cons of pursuing innovation like no one else in the organization.

For startups, the decision to take a digital approach to business is a natural choice. There are few restrictions by way of an existing infrastructure to hinder your efforts. My experience with established businesses is that the desire to transform to a more digitized business may be clear, but the path to get there may be laden with obstacles that must be overcome.

What I consistently hear is that SMB leaders are caught up in day-to-day operational tasks. Even tech-savvy millennials who are taking over a business for their parents and grandparents often fail to prioritize the need for digital transformation. I believe that mindset needs to change, especially if the business is striving to be more competitive in the global marketplace.

Encouraging innovation at a national level

Singapore Finance Minister Heng Swee Keat recently addressed the digitization of business in his Budget 2017 statement. A strong tenet of this statement focused on the need for companies to be able to use digital technology and embrace innovation to stay competitive and grow. To support this effort, the Singapore government has budgeted S$80 million to help SMBs go digital and has launched the Go Digital Programme to help companies build digital capabilities.

My point is this: the business world is quickly moving toward digitization. Rather than sit on the decision to pursue digital technologies, it’s time for action.

Changing minds by seeing value

A willingness to prioritize digital transformation requires a change in mindset, and that only comes from seeing the value in digital innovation. I find that many SMBs fear they can’t afford the cost of growing the business, whether that’s investing in technology or adding people to staff the business. But as technology becomes more affordable and accessible, the barriers to entry are lowering.

Cloud technology is one of the fastest, easiest, and least expensive IT environments to establish and run. And it enables automation so you can grow your business without adding people. My experience with digital technology is that it enables more timely and actionable insights to aid decision making and frees people to collaborate and play a more expansive role in the business. I believe it can have the same impact on your business.

Traversing the digital divide

From new entrants that are going straight to digital to established businesses making the leap across the digital divide, digital technologies allow SMBs to compete in a changing market reality. They’re enabling more efficient business processes and achieving better engagement with customers, employees, and partners. And this is just the beginning.

As digital technologies gain even more traction among SMBs – on which side of the divide will your business be?

To learn how your business can embrace the promise of the digital economy, check out CFO Research’s report “Embracing the Promise of a Digital Economy.” CFO Research surveyed more than 1,000 finance leaders in small and midsize organizations around the world for key insights into the ways these executives are transforming their departments to address their companies’ changing needs.


Richard McLean

About Richard McLean

Richard McLean, regional CFO for SAP Asia Pacific Japan, oversees all key finance and administrative functions for field and regional headquarters, supporting more than 16,000 employees. He has more than 20 years of experience in senior finance roles with leading global companies across a range of industries, including financial services, investment banking, automotive, and IT. He joined SAP in 2008.

Survey: Mobile Payments Can Boost Growth And Profitability

Tom Groenfeldt

Companies that accept mobile payments are growing faster and more profitably than companies that don’t, according to a recent study done for NTT Data.

The fastest-growing companies are also the most likely to accept mobile payments, according to the global survey of 2,300 companies and consumers conducted by Ingenico ePayments, Oxford Economics, and Charney Research. It found that among business respondents with annual revenue growth of 11% or more, 43% have an app that supports purchases and payments, compared with 32% of slower-growth businesses.

Peter Olynick, retail banking senior practice lead for NTT Data, said the survey showed what he was expecting to see. “For a while, there has been this sense that mobile payments are just around the corner.” But companies have been hesitant, often over security concerns, he said. He found the correlation of growth and acceptance of mobile payments interesting.

“It seems that a lot of executives were more conservative about the rate of change than we have started to see among consumers. We see more places that can accept some of these newer payment types and more people pulling out their phone than last year.”

He probably doesn’t go a day without using Android Pay, Olynick said. The point-of-sale delays of the EMV chip cards contribute to the interest in mobile payments, he added. “Some of our own research, plus anecdotal information, shows frustration level over the amount of time EMV takes.”

Looking into the future, the survey found consumers expect their use of cash to drop faster than business executives are planning. “A lot of people think they will be using a lot less cash in the near future and executives are more conservative. Consumers thought they would use 32% less cash and execs were thinking it would be five percent–that’s a pretty big difference.”

Drawing on his own experience again, Olynick said he used to go to an ATM once a week; now he often won’t go for a month, and then it’s mostly to get cash for tips; otherwise he pays by card or phone.

He expects a continued move to general-purpose cards, with a handful of private-label cards like Starbucks or Dunkin Donuts, and more use of general purpose cards like Visa or Mastercard for everything else. “We don’t want to make payments to 55 different places; general-purpose cards have a real value.”

A key lesson from the survey is that retailers profit when they remove friction from the buying process, he said. “Anytime you can remove the friction of the payment, we are seeing those companies are getting a nice uplift. If you walk into a retailer and pick up one or two things and there is a line at checkout, you put it down and walk out because you don’t have the 15 minutes it will take for that queue to open up. When we can get to the point where the payment itself is frictionless, we will get those sales that have been lost. We are very high on the idea that removing that friction, such as Uber, or just making it easier and a little bit faster to get through the line,  all those things are going to make it positive to the retailers who do it best.”

In the survey, cryptocurrencies showed up in a way: 8% of businesses that accept mobile payments also accept cryptocurrencies.

Even that may overstate the case. Chris Skinner, in his recent book Value Web, interviews Jeffrey Robinson, author of BitCon: The Naked Truth About Bitcoin. Robinson says that companies that accept payments in bitcoin really only allow customers to pay in bitcoin, and then they immediately route the payments through Coinbase or BitPay. “Allowing a customer to pay with bitcoin is not an endorsement of bitcoin, it’s a marketing ploy,” he told Skinner.

The survey also found that companies that sell internationally grow faster. “Among companies with annual profit growth of 11% or better, 56% sell to international markets, compared with 44% of their slower-growing counterparts.” Payment guarantee companies like Forter, Signifyd, and Radial make it easier and safer for companies to accept cross-border electronic payments.

Developing countries are eager users of mobile payments – 58% of consumers in developing countries make mobile payments at least once a week, compared with only 39% in developed countries, the survey found, with Kenya and China leading in active use of mobile.

For more on pleasing your customers, see Customer Experience: OmniChannel. OmniNow. OmniWow.

This article originally appeared on It is republished by permission.


How Emotionally Aware Computing Can Bring Happiness to Your Organization

Christopher Koch

Do you feel me?

Just as once-novel voice recognition technology is now a ubiquitous part of human–machine relationships, so too could mood recognition technology (aka “affective computing”) soon pervade digital interactions.

Through the application of machine learning, Big Data inputs, image recognition, sensors, and in some cases robotics, artificially intelligent systems hunt for affective clues: widened eyes, quickened speech, and crossed arms, as well as heart rate or skin changes.

Emotions are big business

The global affective computing market is estimated to grow from just over US$9.3 billion a year in 2015 to more than $42.5 billion by 2020.

Source: “Affective Computing Market 2015 – Technology, Software, Hardware, Vertical, & Regional Forecasts to 2020 for the $42 Billion Industry” (Research and Markets, 2015)

Customer experience is the sweet spot

Forrester found that emotion was the number-one factor in determining customer loyalty in 17 out of the 18 industries it surveyed – far more important than the ease or effectiveness of customers’ interactions with a company.

Source: “You Can’t Afford to Overlook Your Customers’ Emotional Experience” (Forrester, 2015)

Humana gets an emotional clue

Source: “Artificial Intelligence Helps Humana Avoid Call Center Meltdowns” (The Wall Street Journal, October 27, 2016)

Insurer Humana uses artificial intelligence software that can detect conversational cues to guide call-center workers through difficult customer calls. The system recognizes that a steady rise in the pitch of a customer’s voice or instances of agent and customer talking over one another are causes for concern.

The system has led to hard results: Humana says it has seen an 28% improvement in customer satisfaction, a 63% improvement in agent engagement, and a 6% improvement in first-contact resolution.

Spread happiness across the organization

Source: “Happiness and Productivity” (University of Warwick, February 10, 2014)

Employers could monitor employee moods to make organizational adjustments that increase productivity, effectiveness, and satisfaction. Happy employees are around 12% more productive.

Walking on emotional eggshells

Whether customers and employees will be comfortable having their emotions logged and broadcast by companies is an open question. Customers may find some uses of affective computing creepy or, worse, predatory. Be sure to get their permission.

Other limiting factors

The availability of the data required to infer a person’s emotional state is still limited. Further, it can be difficult to capture all the physical cues that may be relevant to an interaction, such as facial expression, tone of voice, or posture.

Get a head start

Discover the data

Companies should determine what inferences about mental states they want the system to make and how accurately those inferences can be made using the inputs available.

Work with IT

Involve IT and engineering groups to figure out the challenges of integrating with existing systems for collecting, assimilating, and analyzing large volumes of emotional data.

Consider the complexity

Some emotions may be more difficult to discern or respond to. Context is also key. An emotionally aware machine would need to respond differently to frustration in a user in an educational setting than to frustration in a user in a vehicle.



download arrowTo learn more about how affective computing can help your organization, read the feature story Empathy: The Killer App for Artificial Intelligence.


Christopher Koch

About Christopher Koch

Christopher Koch is the Editorial Director of the SAP Center for Business Insight. He is an experienced publishing professional, researcher, editor, and writer in business, technology, and B2B marketing. Share your thoughts with Chris on Twitter @Ckochster.


In An Agile Environment, Revenue Models Are Flexible Too

Todd Wasserman

In 2012, Dollar Shave Club burst on the scene with a cheeky viral video that won praise for its creativity and marketing acumen. Less heralded at the time was the startup’s pricing model, which swapped traditional retail for subscriptions.

For as low as $1 a month (for five two-bladed cartridges), consumers got a package in the mail that saved them a trip to the pharmacy or grocery store. Dollar Shave Club received the ultimate vindication for the idea in 2016 when Unilever purchased the company for $1 billion.

As that example shows, new technology creates the possibility for new pricing models that can disrupt existing industries. The same phenomenon has occurred in software, in which the cloud and Web-based interfaces have ushered in Software as a Service (SaaS), which charges users on a monthly basis, like a utility, instead of the typical purchase-and-later-upgrade model.

Pricing, in other words, is a variable that can be used to disrupt industries. Other options include usage-based pricing and freemium.

Products as services, services as products

There are basically two ways that businesses can use pricing to disrupt the status quo: Turn products into services and turn services into products. Dollar Shave Club and SaaS are two examples of turning products into services.

Others include Amazon’s Dash, a bare-bones Internet of Things device that lets consumers reorder items ranging from Campbell’s Soup to Play-Doh. Another example is Rent the Runway, which rents high-end fashion items for a weekend rather than selling the items. Trunk Club offers a twist on this by sending items picked out by a stylist to users every month. Users pay for what they want and send back the rest.

The other option is productizing a service. Restaurant franchising is based on this model. While the restaurant offers food service to consumers, for entrepreneurs the franchise offers guidance and brand equity that can be condensed into a product format. For instance, a global HR firm called Littler has productized its offerings with Littler CaseSmart-Charges, which is designed for in-house attorneys and features software, project management tools, and access to flextime attorneys.

As that example shows, technology offers opportunities to try new revenue models. Another example is APIs, which have become a large source of revenue for companies. The monetization of APIs is often viewed as a side business that encompasses a wholly different pricing model that’s often engineered to create huge user bases with volume discounts.

Not a new idea

Though technology has opened up new vistas for businesses seeking alternate pricing models, Rajkumar Venkatesan, a marketing professor at University of Virginia’s Darden School of Business, points out that this isn’t necessarily a new idea. For instance, King Gillette made his fortune in the early part of the 20th Century by realizing that a cheap shaving device would pave the way for a recurring revenue stream via replacement razor blades.

“The new variation was the Keurig,” said Venkatesan, referring to the coffee machine that relies on replaceable cartridges. “It has started becoming more prevalent in the last 10 years, but the fundamental model has been there.” For businesses, this can be an attractive model not only for the recurring revenue but also for the ability to cross-sell new goods to existing customers, Venkatesan said.

Another benefit to a subscription model is that it can also supply first-party data that companies can use to better understand and market to their customers. Some believe that Dollar Shave Club’s close relationship with its young male user base was one reason for Unilever’s purchase, for instance. In such a cut-throat market, such relationships can fetch a high price.

To learn more about how you can monetize disruption, watch this video overview of the new SAP Hybris Revenue Cloud.