Financials, Do you Really need Them? Part 2

2 Reasons to have

One is obvious and that is compliance (can you say taxes), the other is for decision making.

Part 2 – Decision Making

Without some kind of financial report, you really don’t know how your business is doing, right?

I know that some of you disagree. You think that with online line banking that you can watch your cash balance increase and decrease and that can guide you.

WRONG.

Your cash balance swings all over form day to day depending on the timing of receipts and disbursements. You look at your cash balance one day, and oit looks fine, so you commit to buying new computers or another such expense. Next thing you know is your bouncing cks. Why? Because the day you looked at cash was 2-days before payroll hit or a loan payment.

Your thought you were good, but you were’t. It looked like you were making money, but you really weren’t.

How can you solve that problem?

It’s called a P&L – a profit and loss statement. Even if it’s not perfect, over time it will show you how you are doing, and whether you are really profitable or not.

It will also show you seasonality, which you business may or may not have. What’s seasonality/ It’s when you biz does good part of the year, and not so good other times. In the accounting world, as you would guess we do real well during tax season, and not as good the erst of the tear.

So when I look at my cash balance in April, I think I am rolling in dough! Yea me! But thank God I have studied my P&L’s for May through Sept, so I know that the large cash balance is needed to fund operations in those slower months. I really don’t have excess cash, I have just built up a war chest that I need to fund my business.

A real P&L can guide you.

Maybe you need to raise prices/ Maybe you need to let a staff person go? Your P&L can tell you this.