Risk management policy statement template, Financial Statements are a group of scores and statistics not unlike the statistics and scores which show up after a sports game. To get a sports club owner or manager, the figures, replays, opinions, and the score, are a vital part of assessing, tweaking and improving the match. They would never dismiss them. It’s their way of increasing the success rate. By comparison, business owners and managers, more often than not, it seems, view their financial statements as a necessary evil to satisfy the I.R.S.. They either are completely unaware of their power of these reports, or they simply choose to discount them. Many business owners are happy to turn the reports over to your bookkeeper or accountant to examine.
So, what’s wrong with that? Well, for starters, once the business owner doesn’t utilize the financial reports as a tool, profitability relies more on luck than strategy.
To be aware of the status the way your company has been doing during the year is another important factor and you have to keep this factor in mind as well. If you have been operating your company for quite a while, earnings and revenue amounts are important things you need to contemplate. You can get different kinds of statistics and figures and understand the effects of things in a lot better way.
Afterward, there’s the control issue. Who’s controlling your business? Do you have controls in place? By experience, I will tell you that when the owner does not understand what’s going on with the finances of the business, there is ample room for corruption. Would you understand if somebody had been stealing from you? Sometimes it’s little seemingly insignificant skimming and other times it is more like grand theft. It happens all the time and the business owner is often completely oblivious.
The solution is for the business owner to become educated in the financial areas of the business. This doesn’t mean that they have to become an accountant. However, it’s critical that they become knowledgeable of the accounting model in place. They need to understand the language. Business finance is no more difficult to understand than most other aspects of running a small business. It’s probably easier than some facets. The three main financial reports are The Balance Sheet, The Income Statement and The Cash Flow Statement. The most important Key Performance Indicators are contained in these 3 reports. It is a cake walk! Are financial statements your friend or foe? Friend, definitely friend! Take the chance out of adulthood.