The best management tool at your disposal is right at your fingertips, and you may not even know it! Do you review your Profit and Loss (P&L) monthly to see the trends in your sales by product line? Do you understand the relationship between your P&L and the Balance Sheet and your Statement of Cash Flows? If you do, congratulations! If you do not, you are missing one of the key financial management tools available to you to grow your business and maximize your profits.
Many bookkeeping systems are set up to just track and reconcile what is going in to and out of your various accounts. Then it all goes to an accountant at the end of the year to be adjusted to get your taxes filed. But, it is the in-between that can make the difference in how you run your business. There
are different ways to set up your bookkeeping system for better financial management. I will not go into details here on the how, but I want you to walk away knowing the type of results you should be looking for from your bookkeeping.
Good financial statements should show you:
- What product or service is generating the best sales
- What product or service is getting the best margin
- How your sales are trending by product line
- How your receivables are trending so you can predict cash
- Where you are losing money when purchasing goods and services
- Who your top customers are, and which ones you should consider “firing”
- What inventory is aging on the shelf and what is turning over quickly
Of course, many business owners are tracking all of these questions by experience and intuition. But, will that always be the best strategy? Probably not! Eventually, you may want to delegate some decision making and your experience and intuition will be hard to pass on to your team. As your business grows, you will get farther away from the information that supports your intuition. The time will come when you want to get that data consistently from your financial statements. Take that time today to consider: Is there information that you are not getting from your books that you should be? If so, ask your bookkeeper, your tax professional, your accountant or contact our team to find out what steps to take to get you the information you need to grow.