Owners make finance-related decisions daily. Whether you make the decision or avoid it, there is an outcome happening based on that choice. There are ways to make decisions today that affect profitability tomorrow. It goes beyond paying the bills and managing cash flow. There are methods, strategy and in many cases simple steps that can be put into place to positively impact your bottom line.
Everything that your employees do for your company either creates an expense or revenue situation. But in either case, every action has a financial impact. Properly generated financial statements can tell you things about how your company operates and can guide you in making your company more efficient. We work towards bringing greater efficiency to your company’s operation, and greater profitability to your bottom line.
The reports that are generated on a regular basis in your company, whether they come from operations, finance, or if they’re part of your daily, weekly or monthly dashboard, hold the information that you need to operate your business. If the information isn’t on a report that you’re reading, how can you – or your management team – make decisions that help your company run better. If you are not continually looking for new ways to improve your business, then new opportunities, whether for improved profitability or new sales, just can’t happen.
Your Income Statement tells you how your company did financially last month, last year, or for any other period in the past. But how do you evaluate your company’s performance over the coming months? You develop not just a budget, but a Cash Flow Forecast. If you believe that Cash is King, and it is cash that allows your company to function, then it’s important for you to plan for your company’s use of cash. How much money do you have coming in? How much do you have to spend? Do you have any “discretionary money” left after your committed monthly expenses are paid? You need to know the answer if you’re going to operate your company successfully.
The bank is a critical supplier for your company. They have made a bet that you will succeed and be able to pay them back the money that they have loaned you. The more comfortable they are with your ability to succeed, the less they will bother you, and the more freedom you will have to operate in your business. If they are surprised by your decisions, by the things that happen to your business, or by the financial results that you deliver to them on a monthly basis, you will get greater – much greater – scrutiny. So, don’t surprise your banker.
Even though using Continuous Improvement within your company is a decision made at the top of the company, the philosophy needs to be instilled throughout the organization. If everyone works to make his job better, more efficient, or more cost-effective, then your company will become more successful.
Profitability improvements come in small doses. Every $100 that an employee takes out of weekly production costs brings over $5,000 to the bottom line each year. You don’t need an accountant to calculate that if each of your 50 employees found $100 in weekly production savings just once during the year, that ends up being over a quarter of a million dollars that drops right to the bottom line. And it all started with that first $100 idea.
Since every company is different, why do most financial statements look alike? You should be looking at the particular costs and revenue streams that are unique to your company, or unique to your core business. Your company is different and provides your customers with exclusive benefits that differentiate you from your competition. By analyzing your company’s financial picture in an individual fashion, you will be able to identify the particular numbers that mean the most to you, and that helps you succeed beyond the average.
You can’t stay the same day in and day out. And it’s true for your company as well. You’re either getting better or getting worse. It is important that your employees continue to strive to improve – every day, every hour. If they are working to improve, then your company is moving forward, because no one ever just stays the same. If they are striving to remain the same, to maintain the status quo, then they are just moving backward, as the world moves past them – and you.
Your company has been operating smoothly. But, are you missing something? You look at the things you know about. But is your experience complete? Do you know ALL the right things to look at? Sometimes, an experienced person looking at the same situation, processes and results will see a totally different picture – maybe leading to more profits.
Based on your experience, everything is working well. Sometimes changing things up will bring a different, more favorable result. Don’t be afraid to try something new. The best innovations are the result of someone looking at a situation that they knew nothing about. Without a preconceived notion, they could explore without limits – and to a great result.
Information is power. We’ve all heard that expression, but it has a special meaning for those who run businesses. For
As business valuators and advisors, we are often asked, “What can I do to make my company more valuable?” While
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