Often times small company owners and managers gauge their business results by their checking account. But if you’ve been in business for awhile, you already know that cash rarely equals income or profit.
And even if you know what your company income is, do you really know how to read your cash flow and financial reports?
For most small business owners who are scrambling to generate more cash flow from their operations, they assume that more, bigger, faster is the solution. And that’s like going to your local garage for a car motor that is not firing on all cylinders and your mechanic puts more air in the tires. Sure, that is one solution for one problem (your tire pressure is low) but it doesn’t solve the problem you have.
Diane Kennedy comments on this issue at her blog –
If you want more from your business, sales may be the last thing you need to do. You can make a lot of money from a small business. And you can lose a lot of business with a big business.
When it comes to sustainable success in a business, size doesn’t matter.
What does matter is having accurate financial statements and knowing how to read them. There are four things you need to have to accurately understand your financial statements:
(1) You need a constant to compare against,
(2) You need to know what a change indicates,
(3) You need to know what the cause of the change was, and
(4) You need to know what to do to have more or less (as required) of that change.
This all starts with accurate financial statements. Do you have, right now, a financial statement that is less than 30 days old? If not, give us a call. We can help.