Why Look At Financial Statements? Part 5

No matter how you got started with your business, the majority of business owners only continue to run their business so they make money.  There are a few fortunate people who get to run their business as a hobby and have other sources of income to pay the bills, but those people are not the majority.

Make Your Business More Profitable

Most small businesses I work with are not corporations, so the money that the business makes is how much they get to take home.  That means the more money your business makes, the more money you make!  All of the other reasons why you should look at your financial statements tie into this one.  If you know how much your business is really making you can make a plan to increase that amount.  If you are planning for the future, you are creating a plan to make more money.  If you are making decisions about your business they tend to be decisions that will help increase your profits.  And of course if you are making sure you have cash to pay your bills, you are probably making a plan to help increase that cash.

When you are looking at and analyzing your financial statements monthly you can see trends in your business to help it grow.  Let’s say you are a restaurant that is looking to increase sales in the winter months.  You have created a chart of accounts in which you can see how different parts of your business is doing and you know that the highest percentage of your revenue in the winter comes from your to-go business.  In the winter people in your area tend to want to stay home and not go out as much.  Knowing this can help you increase your traffic in the winter by focusing your advertising on to-go orders.  A lot of restaurants and businesses tend to close on Tuesday and Wednesday in tourists towns, but maybe you see an opportunity to offer to-go on days when no other restaurant is open in town.  You can cut staff costs by closing for dining on those days, but still offer food for take out.  This could help increase your revenue and profits in your slow months which can also help your business with cash flow, avoiding high interest loans, etc.

Overall, everyone has their own reasons why they look at their financial statements, but I think the one thing that everyone can agree on is not looking at your financial statements definitely does not help you in any way!

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