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Financial Statements as a Business Tool
November 06, 2008

Do you look at your financials each month? And if you do, do you understand what they’re telling you? They are a good tool to use to see how profitable your business really is. Chances are you have an accountant/bookkeeper to help you out with the day-to-day accounting. But this doesn’t mean that they should have full responsibility for everything financially-related in your business.

Be vigilant - it’s your company. Understand your financial statements by asking questions. Compare your statements month after month. If you think that you had one of your best months in sales, then you should see an increase in revenues. And if it doesn’t show, ask why? The accountant may not have the full answer, since the answer may not be solely in the numbers, but your sales manager may be able to corroborate what the financial statements show. Maybe the number of your competitors increased so your sales people needed to offer bigger price discounts.

These are things that a profitable business owner knows. You will be able to better react towards both negative and positive events. By not spending the time each month reviewing your financial statements, you may not realize that your sales department is offering too many incentives to your customers. Or you may not see that the marketing department did a stellar job in the last ad campaign to increase sales. Your reaction time as the leader in the business to recognize these issues may be delayed and the business may not be as efficient or as profitable as it could be.

My suggestion is to spend a half day every month looking at your financials. And make sure that you are comfortable with the story that the financial information is telling you. It’s your company.

Dayna Holland is a Chartered Accountant whose mission is to make numbers and taxes less intimidating to business owners. Most of her career has been working with various High-Tech and telecommunications companies to minimize their tax burden. Now running her own company, she currently works with a variety of businesses to improve their profitability and handle their taxes.