Here is my challenge to you: every month, when you get your financial statements, draw one conclusion from the statements that create one call to action. Then act. If you do this, your company will be much improved in a year from now.
The problem is you get your financial statements every month, experience a happy or angry moment and put them away. You are missing an opportunity. They are not just meant for review; they are meant to motivate you, draw your attention to something that needs attention. After all, your financials are supposed to be a numbers representation of your business. If there are numbers out of sync than your business is out of sync.
Here are some examples of what I am talking about – these are real examples from clients I have:
- Credit card fees (on the income statement) were 3.2% of sales. And we knew that credit card sales represented about 50% of all sales. That means my client was paying 6.4% – much higher than the 2.3% the merchant rep said. We moved processors and saved a lot of money.
- The working capital number (current assets less current liabilities) dropped a lot. Specifically, the cash balance was in the red zone. Turns out my client had bought an expensive piece of equipment for cash. The business could not support that cash withdrawal so we put an equipment loan on the asset and fixed the cash balances. There is almost nothing more important that cash.
- In comparing year over year operating costs, rent expense went up 17%. Since we had a long term lease with 3% annual increases, that didn’t make sense. The landlord had moved to a new billing software and the data entry clerk entered the wrong number for square feet of our space. That incorrectly raised our rent.
Each of these catches was the result of reviewing the financial statements with an eye to my finding an anomaly. Even if you don’t have a CFO, this does not need to be the job of your the owner. Make it your accountant’s job or the job of your operations manager. Make this a part of their incentive plan. It’s not hard and the results can have a profound effect on your business.
To prove my point, get me a copy of your financial statements (I would be happy to sign a non-disclosure agreement). I will review them and I will find an anomaly. Something that is costing you money and you don’t even know about it. You’ve got nothing to lose.