April is Financial Literacy Month, so it’s a great time to take a look at your business’s financials! One of the pieces of advice we often tell agribusinesses is to “own your numbers”. As a business, you should understand your income and expenses, and know where the numbers on your financial statements came from.  

Typically, to understand the overall profitability and sustainability of a business, we’ll look at an income statement to understand the breakdown of key revenue streams and expenses, a cash flow statement to understand how well the business generates cash to cover its expenses, and a balance sheet to gauge the overall financial health of the business at that point in time.  We’ll look at your Cost of Goods Sold (COGS) to see what expenses are directly tied to production, as a way to help evaluate profitability. While this is some of the basic financial evaluation that KCARD can help with, we can also take a deeper dive to look at your breakeven point, labor to sales ratio, and other information that helps you better understand your business. 

It’s a lot of information, but here’s a few reasons why taking a look at your financials is important: 

First, it will help you have a deeper understanding of the success of your business as it changes and grows. You might look at the numbers and see that a product you thought was successful actually isn’t making money, or you might find that you have some extra funds that you can dedicate to additional marketing. Maybe you’re spending too much money on distribution and it's hurting your bottom line. Whatever the case is, whether positive or negative, you may not discover the surprises until you take a deep look at your financials. 

Once you understand your numbers, you can help make more informed decisions about the business. You can make less risky decisions about adding new products, making personnel changes, expanding your customer base, adding delivery options, and more. Financial projections can help you understand what level of production or business activity that you need to reach target profitability.  While we understand that financial projections for a new business or expansion will never be 100% accurate, it’s better to be prepared than to jump in completely blind.  

Finally, if you’re planning on applying for funding (grants or loans), at least some of these numbers will likely be required. Funders generally want to see that a business/project is worth investing in, and the best way to prove that is by showing the numbers. 

For more information, check out our blog post series on a variety of financial topics HERE. If you would like help taking a look at your financials or developing financial projections, contact KCARD at 859-550-3972 or kcard@kcard.info.