In this discussion, we're going to explore the significance of tracking in running your business. Additionally, we'll be talking about the power of project or product tracking and how it unravels profitability. We'll shed light on the financial intricacies that impact your bottom line.

The Significance of Project Tracking

In the realm of business finance, it's crucial to uncover where profits hide and how resources are allocated. To achieve this, we adopt a structured system. Specifically, what we generically call project tracking. This method involves monitoring your business activities. Concurrently, whether they're individual projects, products, or services, and grouping them strategically.

Benefits of Categorization

Just imagine a supermarket with thousands of product lines. It's impossible to scrutinize each one individually. So, they group products by category. Therefore, this simplifying the process and gaining valuable insights. Categorization is not just about the private sector; it's a concept widely used in arts and creative industries.

Applying Project Tracking to Your Business

Whether you run a service-based or product-based business, tracking different revenue streams is essential. Equally important, prices, and profitability levels is essential. This approach helps you understand which aspects of your business are profitable, require more investment, or are resource-intensive.

Leveraging Digital Tools

In the digital age, tools like Xero make project tracking more efficient. They allow us to allocate funds, record income, and gain insights by category. Digital tools save time. Simultaneously, they eliminate the tedium of manual data capture, enhancing the accuracy of financial analysis.

Actionable Insights and Informed Decisions

Project tracking offers actionable insights into your business's strengths and weaknesses. Instead of viewing finances in aggregate, we look at individual projects, products, or services. This reveals critical details. Subsequently, with this knowledge, you can make informed decisions to drive your business forward.

Additional Resources

To further enhance your financial management, consider exploring Numbers Know How, our sister company. They offer a powerful online planning platform. Notably, this allows you to plan and forecast by different product groups, projects, or services. You can integrate your plans with your accounting system. As a result, this gives you a clear view of reality against expectations.

Conclusion

In conclusion, tracking is not just a financial exercise; it's a strategic tool that empowers your business. It provides clarity, reveals opportunities. Moreover, it helps you navigate the complex landscape of profitability. By categorizing and tracking your projects and products, you gain insights that drive your business toward greater success.

So, remember to embrace the power of tracking, and may your journey towards better financial management be filled with actionable insights, informed decisions, and, unquestionably, success.

When you hear the phrase tracking, what immediately springs to mind? Is it the image of outdoor activities? Is it the image of somebody dressed in a Davy Crockett hat? Well, if that's your thoughts, that's as may be, but I'm going to be talking about tracking today in the context of running your business.

We're going to be talking about the power of project or product tracking and unravelling the profitability, and releasing the power within those numbers.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another podcast episode on I Hate Numbers and today I'm going to be diving deep into the world of business finance and the powerful concept of tracking projects or products or services by categories. In this episode, I'm going to explore why this approach is vital for understanding your business's profitability, your resource allocation and it's important to note it's not just the private sector.

But this is a concept that's very widely used in the arts and creative industries and there's a lesson to be learned from there that we can take over. For those of you who don't know me, my name is Mahmood Reza. I'm a business finance fixer, accountant, author of the book I Hate Numbers, and founder of the firm of the same name and also the sister company Numbers Knowhow.

For nearly 30 years, I've been helping thousands of business owners like yourself make more money, increase their financial awareness, reduce the stress and anxiety and already reduce any tax liabilities that may arise unnecessarily. And I want that for your business. Should we crack on with the podcast in this week's podcast, we're going to look at the significance of tracking the benefits that can arise the power of categorisation, what we can learn from arts and social enterprise organizations,

cross sector wisdom, project tracking for product based businesses or service based businesses, leveraging the tools, unravelling the insights and exploring additional resources. Let's move on. The significance of project tracking. Now in the realm of business finance, it is absolutely crucial to uncover where your profits hide and how your resources are allocated and how they're expensed.

And in order to do this, we need a structured system. I generically call that project tracking. Now this method involves monitoring your business activities, whether they're individual projects, individual products, individual services, and grouping them in a strategic manner. So what are the benefits to be achieved by tracking by category?

Now, just imagine a supermarket, for example. You have thousands and thousands of product lines. It's next to impossible with the time that we have as managers, as business owners, to look at each individual product in individual performance, what they're selling, how much profitability they're generating.

So what will happen for a supermarket, they will group those according to the type of products they are - group them according to what they have in common. So we may group together dairy products, household furniture, white goods, fruit and vegetable,s wines and spirits - you get the picture. If we can then identify the individual products and put them into those groups here It simplifies the process and it makes it much more insightful for us as well. Now the power of categorisation has a couple of things going for it. Now firstly, many business owners, too many business owners, in my opinion, rely on the annual financial statements, which are viewed in aggregate, the total of all the income, the outgoings to make those vital decisions for running their organisations, running their businesses.

Now, this approach can obscure critical and vital detail. So, for example, if your business generates 100,000 pounds annually, with costs of, say, 60,000, you'll assume a 40,000-pound profit, and that's quite a natural conclusion to make. However, within this profit figure, there are going to be highs and lows deserving attention.

Some product groups, some projects, some services will be generating a high level of profitability. Some may be even making losses. What we want to do is to break that total figure down into a more manageable set of numbers and the one that gives us greater transparency and insights to what's going on under the bonnet. Now I mentioned at the beginning about the power of arts and social enterprise organisations, the power of arts and creatives. Now I've worked in that space for nearly four decades plus both as an advisor, a volunteer and a paid for representative. I currently sit on the board of three Arts and Charity Organisations, and I know from the inside and from the outside what wonderful work goes on. Now in those organisations, they will typically receive funding for delivery of particular projects that will have different activities that go on, and it's really important for those organisations to understand the resources that required they need to account to funders for the resources being expensed, the income that's being generated, and therefore this idea of tracking by category is well versed. There's a lot more that can be done certainly, but those organisations do it and that's what they aspire to achieve.

And when we dive deeper into the diverse products and services offered by our businesses, we discover a range of revenue streams is with its unique price point and profitability. In my own business, in my I Hate Numbers business, where we provide a whole host of services to our client base, both nationally and internationally, we will have it ranging from bookkeeping services, compliance services like annual accounts, the services that are required to help run your business like management accounts functions, planning, tax advice, all of those will command different levels of revenue,

different levels of resources, different levels of profitability. Now, this is not to say that we're necessarily going to drop those services, but we want to find out which ones are profitable, which ones require more investment, which ones are time hungry. And those different products and services may have an interaction, and having that better commercial understanding is really vital for when it comes to planning and making decisions.

Now, how do we apply project tracking for your business? Now, whether your business as I describe offers a wide range of services. So if you're in a service-based business like coaching, you might do one to one coaching. You might do one to many coaching. You may run workshops. You may also have publications. Those are your discrete revenue streams. Tracking each revenue stream for income and costs and the resource requirements provides and gives you those valuable insights not just into profitability but where efficiencies can be made, where the pressures are on existing resources, the items that connect with each other

and the values they generate. The theatre company that I alluded to earlier has outreach, workshops, performances, subscriptions, all discrete categories with their own challenges, risks and product profile. Now that lesson that we can draw on from the arts and creative enterprises are very transferable and we can apply those to our businesses.

Those businesses that I work with that wish to expand, that wish to have better information, better understanding what the future holds for them, not just looking through the rearview mirror of their business, but through the windscreen, find this idea of categorisation, find this idea of tracking very powerful and very liberating as well.

Those concepts that we talked about that I talked about, you know are as applicable to product-based businesses as service-based businesses. Group your individual products into categories. What categories you choose you decide. Typically, those categories would have similar price points in terms of what we charge customers.

They’d have similar characteristics in terms of what impact they have on the consumer, clients, they can be grouped geographically, whatever is convenient for you to articulate the story of your business, group accordingly. Now it's all very well to outline this here, but step forward of the world of digital and the digital tools

we have the ecosystem where we develop is going to be our best friend here. It cuts out a lot of the tedium of data capture packages like Xero of which I'm a particular fan and a platinum partner for. It's a fantastic ecosystem to plug in whereby we can actually identify and allocate income according to those categories that we choose in the context of an arts and creative organisation, we can track in the broad picture of projects and where the funding comes from. In a product based business, we can track by product category and perhaps the customer type that we've got.

And we can break those down into a huge number of individual projects, a number of individual products, and disparate funders. So what is it we want to track? What's important to us? And a digital tool like Xero enables us to allocate the funds, record where the money comes from and when we run the reports off at the end of each period, whether it's monthly or otherwise, we get that insight that we're after. If you think about the time investment that you'll need if you do it an alternative way manually or through spreadsheets here again, you're going to be spending a lot of time, a lot of energy unnecessarily making sure no mistakes are made in the calculations.

Let the power of the cloud, let the power of Xero help you. Check out the show notes by the way folks at the end and I'll give you a link to a free guide on the power of digital and cloud accounting. I mentioned earlier about insights and informed decisions, and the real power of project tracking lies in the actionable insights it offers.

Instead of viewing finances in aggregate and in total, more for a compliance function perhaps for end of year accounts. Then this idea of looking at things by projects, by individual products or services reveals both the strengths and weaknesses in your business. Armed with this knowledge, you can make informed decisions to drive your business forward.

There are additional resources we can tap into. It's only fair, before we wrap up, that I mention my sister company, Numbers Knowhow (What a name!) whereby, we're developing communities and we offer resources at a powerful online planning platform that allows you to plan and forecast by those different product groups, different projects, different services.

You can take your financial management to the next level. And also you're able to integrate your plans and connect that with your accounting system, your Xero accounting system so you can actually see side by side your reality against expectation. More of that in another broadcast, but check out the show notes for a trial.

Now, as we round up here, folks, I hope you found this episode enlightening. Hope you found it useful. And if you have, I'd love to hear you share some love, share it with those who you feel would benefit. Let me know what you think, and if you do track things by projects, by categories, by products, by services, what's the basis of your selection?

And until next week, happy categorisation. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.