Takeaways – Financial Intelligence for Business Owners
Thanks to the business owners and accounting professionals who attended my recent seminar on Financial Intelligence for Business Owners. We shared insights and experiences and concerns about business decision-making and learned that we all sometimes feel the pressure of being responsible for making decisions that impact the future of the company, often for years to come.
The realities of the far-reaching effects of your decisions can certainly keep you up at night. Relieving some of that stress and replacing it with confidence that you’re making sound decisions is what motivated me to offer this seminar and is a driving force in my work in general.
As we all agreed, making decisions from your gut will get you only so far. The alternative – understanding the invaluable tools that lie within your financial statements to inform your decisions and provide a foundation for your company’s growth. You need to know:
- Which financial documents are essential to decision-making
- How to read and interpret them
- Which information you need to extract
- How to apply that information to inform your decisions
The information available within the following documents is critical to your growth and success.
- The Income Statement, or Profit & Loss Statement, provides a snapshot of business revenues, expenses, and net income or loss for a specific period of time – data that is essential to effective decision-making. It can help you:
- Assess profitability
- Identify revenue sources
- Better manage costs
- The Statement of Cash Flow is often considered the most essential financial document, and one that many companies don’t produce. It illustrates how cash moves through your business from operations to investing and financing and provides clarity around sources and uses of cash which is critical in decision-making.
- The Balance Sheet provides a snapshot of the state of a company’s finances at a particular point in time. The following are three areas in which the balance sheet can inform business decisions.
- Strategy and planning
- Determining risk
- Securing capital
- We also discussed the importance of having an annual budget, which I refer to as a Profit Plan. Better yet, a rolling, twelve-month Profit Plan reforecasts the next twelve months each quarter. This enables businesses the flexibility to incorporate changes as they occur, on top of an already solid and realistic one-year plan.
Here are some comments and takeaways shared by the business owners and financial professionals who attended my seminar.
- I appreciated the discussion on the statement of cash flows. It gave me more insight into adding/using cash and how to be more intentional about looking at those.
- The profit plan (aka budget) section was an eye-opener and something we don’t pay close enough attention to. I’m excited to start to look at this as we plan for 2025.
- We used to be really good about reviewing our budgets and forecasts with our leadership team every month but got out of the habit because we were busy. I’m going to implement this practice again starting this month.
- The rigor of looking at financial statements is important, and I’m actually a little excited to start looking at planning next year’s budget and forecast.
- Among many things, I learned that we should start getting the Sales team involved in our budgeting process.
- It was refreshing to see how many business owners in this room took time to work “on” their business today. This is what sets apart the good companies from the great ones.
- We look at our financials regularly, but this gave me a really in-depth understanding of the levers we can pull to get to our next level of growth.
- We are positioning ourselves to sell – not for another 10 years or so – but having this knowledge now is going to help us maximize our sale price when we reach that stage.
- This crystalized for me that we have the right fractional CFO in place – you, Rick!
If you’re feeling pressured by the responsibility that ultimately lands with you to make those critical decisions that impact your company today, and in the future, get in touch with me for a complimentary consultation. I’d welcome the opportunity to help you assess not only your financials, but your understanding of how to use them to optimize your decision-making process.
