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How Serious Are You About Your Company’s Financial Success?

Larry Chester, President

Most business owners get financial reports monthly: Profit and Loss, Balance Sheet, Statement of Cash Flows. Some look at them in detail, and others look at a couple of distinct numbers. The problem is, those monthly reports show your financial performance in the past — what has already occurred in your business.

The bigger issue? How you use the information you get to go forward and drive profitability.

Ask yourself, “What information am I using on a regular basis, and how does it help my company succeed?” For example, do you have a cash flow forecast? Many business owners don’t take the time to do this. They’re just running historical reports. And on top of that, they don’t know how to analyze, and then apply the information they’re receiving.

It’s like driving your car down the road while looking in the rear-view mirror.

Using reports to improve future financial performance

Think of all those entries made on a monthly basis by your bookkeeper and your accounting staff. Sure, you’re using those numbers for basic things like filing your tax returns, and it’s important to make sure that you pay the government the right amount of money. Not a dollar more, and not a dollar less.

But if all you’re doing is collecting financial information to report to the government, you’re not serious about your company’s financial success. Or, if you’re only looking at a few numbers on your income statement, you’re not able to take advantage of all the data that’s available to you.

So, once you have given that information to your accountant, what else can you do with it? You should be using the information in those reports to make decisions about how you can run your company better. More efficiently. More profitably.

If you were serious about the financial success of your company, you’d be doing just that, because everything that happens in your business flows down to your financial statements.

It’s not only important to see if your company is making money overall. It’s critical to understand what you’re making money on, what you’re spending money on, and what return you’re getting from that spend — ROI. It really doesn’t matter if you’re providing services or selling products. You should know which of those products/services are successful — financially — by routinely asking and answering questions like these:

  • Which are making you the most money, and which are barely breaking even?
  • Are your profits consistent across all products, services and customers?
  • Are there ways to improve profits or operational efficiency?
  • Are your numbers trending up or down?
  • Are there numbers that are out of place on your reports — different than your typical results?

If you’re serious about making money, then understanding the details about your business’ finances is THE KEY to your success.

Looking at the numbers can tell you what changes you need to make in how your business is operating. If you need to change your pricing. If your internal controls are protecting your company, if workflows and staff time as efficient and effective as possible.

Understanding the numbers gives you a baseline so you can make changes to drive higher profitability.

  • What IS your plan for profitability?
  • How are your costs going to change in the next three to six months or a year?
  • Can you see what’s working, and what isn’t?

Not all of this is readily available on the Income Statement. These questions make it obvious: you have to see the numbers behind the numbers to make decisions for your future. Many of those questions can only be answered by subsidiary reports.

And either you can take the time to do this sort of deep analysis yourself, then plan the action steps you’re going to take, or, you can bring in a professional to lead the effort and work side by side with you to get it done — someone with many years of experience analyzing the numbers to improve your bottom line.

CFO Simplified accomplishes this for clients through a Deep Dive Strategic Analysis, typically looking at five areas to start, then detailing what’s behind each of the numbers:

  1. Product / service gross margin
  2. Cash Flow forecast
  3. Timing and reporting of the month end close
  4. Paperwork flow and staff efficiency
  5. Trend analysis of key performance indicators

Having a handle on these areas then enables us to help clients decide what changes can be made today that will affect profitability tomorrow.

Stop guessing (and get the help you need)

Financial success doesn’t come from guessing about the results. It comes from digging into the numbers. We can organize your reporting so that it is easier for you to understand, and so you finally learn which reports are most meaningful to you for decision-making.

Sometimes business owners say that they don’t need to hire someone to tell them what the numbers mean. They went to school, got an MBA, took some finance courses, and they are knowledgeable. THAT’S GREAT.

But is pouring over the numbers the most productive use of your time? Probably not. You should be working to grow your business. Developing new customers, developing new services or products. Guiding your staff. You should be spending your time creating a strategic plan to take your business to the next level, and getting buy-in from your employees.

Instead of doing it yourself, find a part-time resource to guide you — a fractional CFO — to provide you with consistent reporting and analysis. Then you have the best of both worlds. You can spend your time developing new sales opportunities, and you’ll have the resource available to give you with the financial information you need, in a manner that you can use.

There’s a commonality among many of the businesses we’ve worked with over the years: the owner looks at the historical reports, and says, “Everything looks good.” Sometimes they’ll realize they could be doing better, and they’ll add “except for X.”

That’s where our part-time service comes into play. We tackle the “except fors,” and, give you the means to build a forward-looking plan. You get the sound financial leadership you need right now — and put an end to your worries about how well you’re managing your finances for the long term.

If you want to get more serious about your financial success, give us a call.

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