Key Financial Ratios Often Reveal the Difference Between Successful and Bankrupt Companies
Key Financial Ratios Often Reveal the Difference Between Successful and Bankrupt Companies
2 min. leestijd

Key Financial Ratios Often Reveal the Difference Between Successful and Bankrupt Companies

For most small and medium-sized enterprises (SMEs), governance is something far away. In other words, measures of good governance are not yet part of daily practice. Particularly explosive growth and/or external demands, for example from an external financier, have changed this to date. Especially to make the likelihood and impact of risks manageable. Oddly enough, because fundamentally every entrepreneur wants to be successful and certainly not fail. Thus, corporate governance aimed at SMEs is actually relevant for every entrepreneur: it is about having control over realizing entrepreneurial ambition. And there's quite a lot involved. Therefore, we will be paying ample attention to this unexplored area in the world of the entrepreneur in the coming period.

Today, Route ICR shares the fifteenth article from the series 'How to practically implement SME governance'.

Key Financial Ratios Often Reveal the Difference Between Successful and Bankrupt Companies

Amsterdam, March 23, 2022 - Entrepreneurship is simple. However, the hardest part is to undertake business simply. But why is that? Let's discuss this in the coming period. We will also look at how this problem can be solved. Today, Route ICR shares the fifteenth article from the series 'Implementing SME Governance in Practice'.

Knowing and understanding the main financial ratios and figures of your company has often been neglected. On one hand, it's understandable since it's not as exciting as landing a big deal. But on the other hand, it could very well be the difference between a successful and a bankrupt company. Therefore, entrepreneurs with serious ambitions must comprehend and internalize the key ratios and figures of their business. If you thoroughly understand how your key ratios behave, it can have significant predictive value.

Making Better Decisions Creates Peace of Mind

Key ratios and figures provide quick insight into your current position. Consider the answers to various questions. How profitable is your company? What is the profitability of your customers? Does your company need financing? How much risk does your business face in encountering difficulties or even bankruptcy? Or suppose you want to increase production by 20%. What does this mean for the capacity you need to employ? What cost structure is associated with it? Is your company logistically capable of implementing this change? What costs are involved? The key ratios of your company help to answer these questions. This enables you to make better decisions, leading to peace of mind.

Predicting the (Financial) Future

In practice, numerous questions and situations arise. For all the corresponding scenarios, it's comforting to know the financial implications. Determine where you want to end up. You do this for your company's vision, strategic objectives, and the translation of these goals into figures. So, you create a tight financial plan. Because fundamentally, as an entrepreneur, you want to create value. Following the key ratios and figures of your company provides insights that are actionable, or even necessary. This helps you better predict the financial future of your business. And that's exactly what creates the peace of mind every entrepreneur seeks. This aspect of implementing SME governance is crucial to becoming a better entrepreneur.

Over de schrijver
Entrepreneurs take risks and are incredibly important for our economy. Unfortunately, a good balance between work and private life is often lacking. It is precisely this that drives Paul Joore to have a positive impact on the lives of entrepreneurs and contribute to their success.Paul is the ambitious founder of the online Route ICR platform for successful entrepreneurship. He is also the author of the entrepreneurship book ‘Succesvol groeien doe je zo!’ (Successful Growth, How to Do It!). "I believe in setting seemingly unattainable goals. Challenging oneself, innovating, and constantly improving. Supported by a well-structured organization."Paul has tens of thousands of flight hours in the business world, with a background as an entrepreneur, coach, interim manager, and former chartered accountant. Always focusing on realizing challenging goals as effectively and efficiently as possible: in other words, being successful through being inControl, in the entire process from true ambition to result.This only works by thinking, planning, and acting from a goal-oriented structure. In the SME sector, there was a lack of knowledge and experience in this area, and well-thought-out solutions were not available. Therefore, Paul decided to create this himself.In many SME businesses, the 'madness of the day' reigns. As a result, entrepreneurs are not inControl when it comes to achieving goals, let alone challenging ones. Therefore, they also do not realize their true ambition. Worse, for many, this ambition is not even crystal clear. And how can you work towards a goal without having a real one? Logically, there can also be no balance between work and private life. And no balance means no rest.So, the Route ICR web app helps entrepreneurs and teams to be inControl in the entire process from ambition to result. With the ICR "InControlRating" of your business as a growth compass. Very clear and handy to know through one number how your business is and will be doing. So you know whether you will achieve your goals and be successful from this starting point. And if the score is disappointing, you also know what to work on to improve.This way, you gradually work towards a better balance in your life, feel good about yourself, and have a positive mindset! Are you curious? You too can experience the Route ICR web app for 14 days free of charge, without obligations!
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