Have you Reviewed Your Financial Statements?

Several weeks ago, I was meeting with one of my clients with the first item of priority being a review of their most recent financial statements.  Prior to the meeting the owner had actually contacted me with a concern that cash seemed to be too low considering the recent business level.  Prior to meeting with my client to go over their financials, I thoroughly analyzed all key financial statements by comparing certain numbers to the projections (a well thought out budget).  Also, I compared the same time period in the previous year.  I assembled this analysis into a format customized to their company to enable the owner to have an accurate understanding of their business financially and to assist them in making timely, appropriate decisions going forward.  In my review, I noted, showed, and discussed with them that the only number that seemed to be off was their sales level for the previous two months.  They had been controlling their costs very well.  The owner said the sales drop did not make sense, and there was additional research started immediately to investigate reasons why the sales number was low.  To make a long story short, the owner discovered that a key “trusted” employee had been stealing from the company!   This discovery no doubt has saved the company a tremendous amount of future financial distress, and it all started with a simple monthly financial review.  My reason for writing this article is to let every business owner know that one of the most critical tasks you can do is to review your financial statements every month.  There is simply no excuse for neglecting this step.  You have total control over the situation.  Below are a few benefits that can result from a monthly review.

• Help you determine if your pricing is too high or too low
• Assist you in determining whether you have a sales problem, expense problem, or both and why.
• Help determine which areas of your business are the strongest and which are the weakest.
• Enable you to determine approximately how much your company is worth and how much more improvement is needed to achieve a certain value level.
• Pinpoint why the cash position is high or low regardless of the net profit level.

Do not neglect this critical task!