One of the fastest ways to develop more control over your business is the application of the “black or white” power of business math to your decision-making. The results of your cash, profit, and balance sheet calculations are clear and definite; either what you calculated happened or no, it didn’t. There are no shades of gray to distract you.
Applying the math of business to your business is the best way to understand patterns, to quantify relationships, and to predict the future. Business math is consistently used by the best business leaders to quantify the results of actions taken to understand what works and what doesn’t across their business.
The financial reports used by your accountant to calculate your financial position for tax liability purposes is the roll-up of each completed business transaction recorded in your accounting software. If you understand the math of business, you can use these same financial statements to generate higher operating cash flows and profits. You do this when you understand how business profitability is calculated and a handful of business profitability ratios.
By learning how to do the profit math of business, you develop more control over your business through the application of the “black or white” power of business math to your decision-making. The results of your profit calculations are clear and definite; either what you calculated happened or no, it didn’t. There are no shades of gray to distract you.
When you work with the numbers of your business, you better see what you need to start, change, and stop. Knowing what goes into calculating your business profitability tells you where your business is in and out of control. Failing to apply the profit math of business makes it difficult to know what areas in your business are not performing as you need it to.
The opposite of truth is chaos. Mathematics makes our life orderly and prevents chaos. Certain qualities that are nurtured by mathematics are power of reasoning, creativity, abstract or spatial thinking, critical thinking, problem-solving ability and even effective communication skills.
Failing to do the math of business compromises your ability to decisively decide what to do differently because you are much more likely to see shades of gray (fuzzy and unclear) than you do black or white. It is hard to be confident in taking on a new action or stopping an old one when you can’t do the math.