Tools for Success – Financial Statements and Metrics
The first article in this series listed several tactics to increase your business success. Each of the successive articles takes a closer look at one of those tactics. Last month, we talked about the importance of keeping perfect credit and building long-term banking relationships.
The next two lessons cover topics important to your business success: financial statements and metrics.
I can hear the groaning. I know you hate the financial statements, but they are unavoidable. I will give you one escape hatch: If you have enough employees, you can delegate preparing them to a trusted employee. If your business is small and you can’t delegate, then buck it up.
You must have monthly financial statements by the 10th of the month regardless of whether you do them or someone else does. I don’t expect you to understand every single line item, but I do want you to dig into your P&L by the 10th. Make sure that your P&L shows the prior 13 periods so that you can see how you were doing in the same month last year and in all the months in between.
For the moment, let’s shine a light on the expenses. Know that wherever you shine your light, you will improve. Once you shine the light on expenses, you don’t have to be a college graduate to see which ones have gone up and which ones have stayed the same or gone done since last year. Make sure your financials show percentage of sales also so that you can see actual dollars in addition to percentages. You will figure out very quickly which of the expenses need your attention.
If you make poring over your financials a monthly habit, you will get better at seeing where you need to make improvements and better at seeing whether the changes you are making are affecting your results the way you expect.
That last point is why you need those financials on your desk by the 10th. You need to get them analyzed in time to make a change so that you can see results when you look at the next set of financials next month.
Like every other owner, you get 12 opportunities to review your monthly financials. If you don’t get them until late in the month, you can’t make the needed changes at the pace you should. As I see it, if your financials aren’t on the desk by the 10th, you are giving away 6 of your 12 opportunities and will solve problems half as fast as a competitor who gets timely financials and acts on them with an effective program. Why wait one month to start working on a problem?
Remember also that the advantage of timely financial analysis and action is cumulative. How much farther along could you be if you used every month to solve issues revealed by your financials? Once you see problems and start working on them, you will see results and get excited about making your business all that it can be.
Remember only you can make business great!
Ron Sturgeon, Mr. Mission Possible, has been a successful business owner for more than 35 years. As a small business consultant, he can wisdom and advice gleaned from an enviable business career that started when he opened a VW repair business as a homeless 17-year-old and culminated in the sale of several businesses he built to Fortune 500 companies.
Ron has helped bankers, lawyers, insurance agents, restaurant owners, and body shop owners, as well as countless salvage yard owners to become more successful business people. He is an expert in helping small business owners set the right business strategies, implement pay-for- performance, and find new customers on the web.
As a consultant, Ron shares his expertise in strategic planning, capitalization, compensation, growing market share, and more in his signature plainspoken style, providing field-proven, and high-profit best practices well ahead of the business news curve. Ron is the author of nine books, including How to Salvage More Millions from Your Small Business.
To inquire about consulting or keynote speaking, contact Ron at 817-834-3625, ext. 232, rons@MrMissionPossible.com, 5940 Eden, Haltom City, TX 76117.