Last Month, I posed the question “Who’s Your CFO?” I argued that every business had someone who functioned as CFO, and the real question was whether or not they were qualified to do so!? I hope that article provided some “food for thought”.
Recently I had a business owner tell me that “financial statements didn’t mean anything to him”. Well, after looking at his statements, I could certainly understand his point of view. They were so improperly prepared that they didn’t mean much to me either (except it was obvious that he hadn’t been monitoring the condition of his business). Had they been properly prepared, he would have had a much better handle on how much money he was losing on a monthly basis and we might not have been talking under a “crisis” scenario!
Financial statements should be able to tell the story of the performance of your business. At a glance you should know whether you are making a reasonable profit or not and how that profit is translating into “cash in the bank”. Too often, business owners try to run their business by looking at the cash number. When the cash number starts to decline but the improperly prepared financial statements suggest that the business is profitable, they’re usually perplexed.
Rather than “digging-in” to try to better understand the situation, business owners are often uncomfortable with their understanding of financial statements and choose to ignore that nagging feeling that something is wrong. They choose to believe the “evidence” of a positive number at the bottom of the income statement, usually because that is what they want to believe. The result is that they continue business as usual, waiting until they are in crisis to reach out for help. Rarely, does a bad situation get better by ignoring it!
The better approach is to reach out for help understanding your financial statements. And if the person explaining your financial statements to you cannot do it simply, concisely, in a way that you understand, then find someone else. Don’t accept the fact that you, the business owner, can’t understand it! It’s really not difficult, and even if it is, it’s simply too important to ignore.
Do Your Financial Statements Mean Very Much?
If you need help with your business, financial plans, or goal setting, please give me a call at (314) 863-6637 or send an email to And, remember . . . Your Cash Is Flowing. Know Where.
P.S. – Notice that I used the term “profit” . . . that’s the subject for next month’s article!
Copyright @ 2007 Homza Consulting, Inc.