In this video I show how the owners of highly business profitable business owners use 15 minutes a week reviewing certain financial numbers to increase their sales, cash balances and profits.
How spending 15 minutes per week reviewing five reports can increase your profits tremendously.
Nothing is interesting if you’re not interested. – Helen Macinnes
About the last thing most business owners are interested in is spending some quality time with their accounting records. In fact, I often joke that all business owners have ADD. They have so many hats to wear that reviewing their books often loses out to selling their products, producing their products, delivering their products, and collecting from their customers.
But the successful business owner truly understands that accounting is the language of business, and that reviewing their accounting reports on a regular basis is a major part of increasing their business profits, sales and cash flow.
Business is NOT a game of numbers; but a game of human behavior—in particular, the business owner’s behavior. Good accounting data gives us a scorecard to measure our behavior and its effects. K.C. Truby (the Lonesome Cowboy and marketing expert) calls it the Five Minute Books. I call it the Daily Scorecard. But we both agree that it is a vital tool to achieving success.
The following are the five essential reports and how to use them:
- A daily profit and loss. Review your income statement at least weekly in order to identify what is or isn’t working for you. You want to identify where you should focus your limited resources and time. Comparing results from month to month helps us identify trends and react quickly. You also want to compare your results to the industry average.
- Sales reports by product or customer. Sales reports by customer with related costs and profits help us to identify our most profitable customers and products. With this report you will try to identify your best customers so that you can 1) make sure you focus on giving them excellent service and 2) look for opportunities to sell them additional products. Your best customers already know you, love you, and trust you. This makes them the easiest customers to sell additional products or services to.
- Accounts receivable. The most common cause of cash flow problems is a failure to keep collections under control. A daily review prevents surprises and allows you an improved chance of collection. Simply put—the older an invoice is, the less likely you are to collect on it.
- Accounts payable. Too often a business owner looks at their bank account and sees that they have enough cash to buy that new car or piece of equipment. What they don’t know is that they owe their vendors more than what they have in the bank. If business owners know how much cash they need in the next thirty days, they will more often than not find a way to meet their obligations. A daily review of your obligations will help you sleep at night, as well as plan for the timely repayment of your vendors and creditors.
- Cash on Hand. Profit can be an opinion but cash is a fact. Each day you must know exactly how much you have in the bank. This one step alone will drive you toward a bigger bank account.
Highly profitable businesses are almost always run by owners who know their numbers! They value the information their accounting records provide, so they often hire an experienced CPA to help them analyze them.
The following video shows you how to set up these reports and provides you with some tips on what to look for when you are reviewing them.
(INSERT VIDEO)
Action Tips:
- Decide what reports you need to review in order to discover what you need to do to improve sales, cut costs and increase profits.
- Design the reports in your accounting program.
- Schedule some time weekly to review this.
- Hire an experienced CPA to:
- Help you set up the reports.
- Show you what to look for.
- Seriously consider hiring an experienced CPA to review your financial reports quarterly. They will often spot trends that you won’t.