Step 3 to Optimising for Profit & Cash: Numbers Strategy

Here is the third step to pulling more time, money and freedom out of your business.

If you have not read Step 1 (Numbers 101) and Step 2 (Numbers Knowledge) yet, start there. Numbers Strategy builds directly on both. Once your core knowledge is locked in, you are ready to get strategic.

What is Numbers Strategy?

Numbers Strategy is about four things:

1. Creating meaningful numbers, which is different to accurate numbers

2. Reviewing your profit and loss strategically

3. Reviewing your balance sheet

4. Reviewing your cash flow

Accurate numbers tell you what happened. Meaningful numbers tell you what to do next. That is the difference, and it is where most business owners get stuck.

What happens without Numbers Strategy

Your business will not perform optimally, and you will leave cash and profit on the table. We call this profit and cash leakage.

It rarely shows up as one big problem. It shows up as costs sitting in the wrong place, margins you cannot see clearly, and decisions made without the full picture. Month after month, that adds up.

Numbers Strategy 101: where to start

Here are three practical examples of getting strategic with your numbers, so you are ready for step 4 (Numbers Targets).

1. Check where your cost of sales wages sit

Look at your profit and loss. Are your cost of sales wages actually sitting in the cost of sales area? Is superannuation sitting there with them?

2. Split out non-sales wages

If any of those wages relate to non-sales tasks like admin or marketing, have you moved that portion of wages and superannuation into operating costs? This one change can transform how your gross margin reads.

3. Know what good looks like

Do you know what your key expenses should look like as a percentage of turnover, based on industry benchmarks or the rule of thirds? Without a reference point, you cannot tell whether a number is a problem or perfectly normal.

The rule of thirds is a simple starting benchmark, especially for service based businesses: roughly one third of your revenue covers direct costs (materials and labour on the job), one third covers overheads (rent, admin, insurance, marketing), and one third is left as profit.

It is a guide, not a rule. The right split varies by industry and by business model, and a service business will look different to a trades business carrying materials. But it gives you a reference point, and a reference point is what turns a number into a decision.

These are foundational items. Get them right and you can set targets, monitor them, and take the action needed to grow your profit and cash, not just your revenue.

There is no successful business owner who does not know and use their numbers.

What changes when you get strategic

When our clients get savvy around Numbers Strategy, they start to:

• Identify the good from the bad: what are the real pain points, and where is the profit and cash going?

• Dive into the problem and build a plan to solve it

• Take action

• See the results month by month

Which adds up to a healthier bottom line.

Four tips to improve your Numbers Strategy

1. Reach out for support around your numbers. The best strategic bookkeepers and accountants engage consultants to hold them accountable to their own numbers. If they need support, it is likely you do too.

2. Change your mindset. Errors in thinking are often what hold a business back. Now that you know the consequence of having no Numbers Strategy, make it a priority.

3. Schedule the time. Block it in your diary, and use your project management software to keep yourself accountable.

4. Bring it into your monthly meetings. Numbers Strategy belongs in your monthly financials and KPI review, not in a once a year conversation.

And do not let it overwhelm you. A good strategic bookkeeper will take you on the journey, and step by step you will get results.

The bottom line

Follow these steps and get strategic around your numbers, and you will increase revenue, reduce expenses, and find more profit and cash.

Next up is Step 4: Numbers Targets.

Frequently asked questions

What is the difference between accurate numbers and meaningful numbers?

Accurate numbers are correctly recorded. Meaningful numbers are structured so you can actually read them, for example wages allocated between cost of sales and operating costs so your gross margin reflects reality.

What is profit and cash leakage?

It is the profit and cash your business loses through pricing, cost structure, and timing issues you cannot see because your reporting is not set up to reveal them.

How often should I review my numbers strategically?

Monthly. Build it into your regular financials or KPI meeting so it becomes a habit rather than a reaction to a problem.

What is the rule of thirds in business?

The rule of thirds is a rough benchmark that splits revenue into three parts: one third to direct costs, one third to overheads, and one third to profit. It is a starting reference point for testing whether your cost structure is healthy, not a fixed target, and the right split will vary by industry.

Do I need a bookkeeper to do this?

Not necessarily, but most business owners move faster with support. A strategic bookkeeper structures your reporting so the numbers mean something, then works through them with you.

Ready to get strategic with your numbers? Book a free call with Salt Strategic Bookkeeping and let's look at where your profit and cash are really going.