What’s Wrong With Your Financial Report Analysis?
Most of small business owners are still trying to get hold of financial report analyses. I receive hundreds of questions every month about the benefits of financial reports and the right way to scrutinize financial reports. I try to keep it simple, but the clients complicate things in their heads. Yes, most small business owners complicate basics about analyzing financial reports and screw it up altogether
Financial Report Analysis
Financial reports are indeed the best tools for reviewing the health and financial position of any business; however they are also ideal for projecting and planning growth cycles and investment plans. These worthless looking tools might seem of little importance, but in the long run, they assuredly help you pave your way towards success. So if you are not doing it right already, here is our quick guide to help you understand the basics of financial reports analyses.
Recognize Important Financial Reports
The primary thing about financial report analyses is identifying what to look at. Most small business owners fail at this because they don’t know what to analyze. Once you identify key financial reports, your task becomes a lot easier. Small business owners prefer cash accounting as it is an easy option but it doesn’t work well for growing businesses and eventually you have to shift to accrual accounting, so try doing it from the start. It’s okay to ask your bookkeeper for assistance while reviewing financial reports but be wary of the fact that if the guy is trained enough to customize the reports as per the needs of your business. Outsourced bookkeeping services is a good help for this scenario as most of these offshore companies have a team of professionals working on your books resulting in a collective and qualitative measure.
Keep Calm and Review Smart
Almost every day I see small business owners panicking about their bookkeeping: they lack the approach and assert their naivety with dominance. I have one thing to recommend; be clear of your objectives. I understand that you might have a packed schedule, but take some time out of the busy calendar you follow and sit back to review your financial reports. Trust me, it promises huge returns in quick time! Don’t jump to conclusions without thinking twice. Try to read the reports as many time as possible before settling on something and be wary to point out lapses. If you are working with an outsourced bookkeeping service, then let them know when you need your financial reports. It’s better to review the reports once a month, but if you want to channel more energy into this task, ask for a weekly or a fortnightly report.
“I choose rich every ******* time!”
Most of small business owners I interact with have this uncanny obsession for sky-high sales figures. It’s good to be enthusiastic about sales but there’s no point in over emphasizing on sales figures. My point is – obsession about sales figures is not worth it. One of silliest bookkeeping mistakes is to concentrate solely on sales while reviewing financial reports. Sales figures don’t translate to profit directly; there’s a lot which goes into consideration, so this obsession with sales figures is really overrated.
DiCaprio in that famous speech from The Woolf of Wall Street about riches sums it up well but you have to give a little to get a little, and when you want exceedingly more than you must have it in yourself to give a lot. Use financial reporting to achieve this. Spend more time with your bookkeeping and base all your management decisions on the data you collect after reviewing your financial reports.