How often would you check your speedometer while driving, if it took you an hour to read it, analyze it, and understand its feedback? Probably not very often.
It is any wonder that most small businesses don’t review financial statements on a regular basis? You can drive a car and have a general sense of your speed without the speedometer, but there are critical times (like as you pass that state trooper) that knowing specifically whether you are going 85 or 75 can make a big impact.
The first step to proper financial management is to know your current financial status, and to frequently verify that you are where you think you are.
Common Ineffective methods of managing financial status:
- Using tax returns to review financial results. Tax accounting is designed for complying with tax laws, not for gaining business understanding.
- Relying on a default QuickBooks income statement. Default profit/loss statements are often difficult to read, misclassify transactions, and don’t fully reflect financial status
- Checking the balance in the checking account. Cash position is crucial to manage, but is a poor measure of overall financial status.
- Reviewing financial results annually with your tax accountant. It is much easier to make small frequent changes than to wait until you are far off course to make adjustments. Further, tax season is the busiest time of the year for tax accountants, and the time when they have the least ability to give guidance.
We can help you create effective methods of managing financial status that are:
- Easy to read and understand
- Customized to your situation
- Pertinent to the most pressing issues in your business