The financial statements for your business each period reveal a story about your accomplishments, your shortcomings, and where you are headed in the future. What story are your financial statements saying about your performance? Is it a cheerful story or is it agony each month? What story do you really want your financial statements to say?
I was reminded this past week about how the profit and loss statement (P&L) tells your story even without written out explanations. The numbers reveal whether your business was profitable, how much tolerance your metrics are within your industry, and if your business has a future. A skilled business person can see a financial snapshot of your business to determine any weaknesses, your triumphs and what chance you remain in business next month.
“Every moment is a fresh beginning.” -T.S. Eliot, author
I had not mentioned success or failure in the opening to this discussion until now because the story the numbers are saying may not necessarily translate to success or failure. It depends on your vision and which line in the P&L is supporting your own definition. You may be a social entrepreneur who distributes more through the middle of your P&L and even tone down the importance of the topline, but you call yourself successful. You may be also solely focused on increasing the bottom line each month, but you did not make your goals for several months. Success in these terms must also mean that you can sustain the business in the long run so don’t ignore the topline altogether.
What is your financial story?
- Your financials reveal what you do each month. Are your numbers in line with the industry standard for your size? Are you carrying heavy debt? How much are you donating to charity? Are your employees being paid market level wages, and what benefits do they receive? Are you reinvesting in the business? Your financials can reveal your character and the level of risk within your business.
- Having no financials reveals even more. If you are not even tracking your accounting and finance metrics in an organized system, then this also reveals much about you and your business. It says you have no idea where your costs fall and how to improve your business. You lack critical information for making assessments and for decision making. Your failure to track your financial data puts your business at risk, which may in fact reveal your overall character.
- What story do you want to tell? As you proceed with your daily business, you have choices everyday on what your story will be. Your values will often translate into actions, which at the end of the month will reveal itself in financial numbers. You must decide on the story your business is to tell and take action. Develop a vision and set forth the right attitude and motivation to achieve your story.
You must know your finances if you are to determine your financial legacy. An accounting and finance system helps you to control costs and to know what your sales are plus other critical metrics. Your financial legacy is determined by your actions or lack of actions. Tracking, measuring and assessing financial data can lead to critical insights that shapes your thinking and decision making. Knowing your finances will help you to influence your story.
“Don’t tell me what you value, show me your budget and I’ll tell you what you value.” -Joe Biden
What actions are you taking to shape the financial story of your business?
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Copyright 2016 – Stephen McLain