Believe it or not, one of the biggest levers for business success is also something that many business owners shy away from – financial reporting.
Financial reporting involves looking at your balance sheet, profit and loss and cash flow statements. It can be as comprehensive or granular as you like, from reporting at a company-wide level, to going deeper and tracking at a task, project or regional office level, the sky really is the limit.
So, how often do you prepare a full or meaningful financial report on your business? If your answer is annually then you’re putting your business at a disadvantage.
Data is a powerful tool for business owners. When you run your financials, you can gain all kinds of insights that can lead to better business outcomes. For example, by analysing and comparing your actual profit and loss against your budgeted profit and loss, or last year’s profit and loss, you can clearly see whether you’re on track, or running behind. Are you doing better than last year? Better than your projected budget? Are you and your partners making money from the business? Is it actually worth being in business?
If you are a business owner you need to be able to answer these questions, and understand the why, how and what for in relation to the finances of your business. You need to know if revenue is more than last year and by how much. Has the gross margin improved, or have IT costs have gone up 35%? Have debtors have gone up 150%? Is it paying too much rent? Is it an unexpected increase in utilities?
Businesses of all sizes in today’s market have no excuse to not get timely and relevant financial reports because the software available, such as Xero and its add-ons, have made this a reality. Reports eight months after year end are not very useful; running a report one month after the end of a quarter allows you to see a problem and address it quickly, potentially saving the business thousands (or even more).
We love helping SMEs to achieve financial clarity and independence and we have helped out many clients, providing them with surprising and useful insights into their business. If you want to know what to look for in your business data, give us a call today.