We hear it all the time “How the heck did we lose money? It’s been coming in hand over fist!”
How Often Should You Review Your Financials?
Maybe you’ve even said that a time or two. Here’s the deal – if you aren’t reviewing your business’s financials on a regular basis then you aren’t aware of where the money is or where it’s going. There’s a couple of moving parts here, too. First, owners have to have a system in place for them to review those statements. For retail operations, that means daily, weekly and, of course, monthly reviews in addition to the quarterly and yearly reviews. Other types of businesses might be able to get by just reviewing weekly and beyond.
If you don’t have a review process in place, then that is a great place to start.
Next, though, is understanding what that review is telling you.
I know, I know, you know how to do that. I’d challenge you to sit down with your bookkeeper or CPA anyway and get them to give you some of their interpretations of what each version of your financials mean to them. That could be the daily “Z” tape, the weekly reconciliations, or a monthly P and L. Anyway you cut it, you’ll learn something you hadn’t thought of yet and that will only serve to make you a smarter owner and operator. All too often, ownership blames financial issues on exterior forces when, in fact, better stewardship of the numbers would result in a stronger, better-performing company regardless of the market.
What To Look For.
At the same time, careful study of the trends within the business from the financial point of view can also yield valuable information about how systems are performing. Too much inventory on the shelf? Spending too much in labor? Phone and internet costs climbing? Financial statements all can give you these answers, yet many owners only look into this information when inspecting for tax purposes. Honestly, when was the last time you reconciled the P and L?
Do you even know how to generate one?
Certainly, these are a key role that a bookkeeper plays, but ultimately, the review of the financials is part of any owner’s responsibility. The answer? Simple. Make the time to have an active review scheduled for all financial data. If that takes place with your bookkeeping or accounting team, no problem, but that review can save you thousands of dollars – even in just one day.
Save Valuable Dollars.
One example that comes immediately to mind was a company in Georgia that had a sales team that flew all over the United States and Canada. By reviewing the best times to book flights (actual travel days as well as how many weeks in advance) they were able to cut their sales team’s travel budget by $4500 each month. How’s they find this? Simple! The CFO realized in his reviews of the budgets – and as a result of some personal travel he had scheduled – that the team could continue to meet their responsibilities to clients but by rearranging their travel scheduling system, they could enact real savings in the company.
Understand that you may not find thousands of dollars by taking an active role in the review of financial statements, but you’ll start to see trends, and quarters, and dimes, and those quarters and dimes will add up into dollars. Every one of which you will have earned.
By: Chris Groote
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