Have you ever wonder about that store you used to venture every now and then, and thought it would last decades, but closed up shop just yesterday? Well, that should be no surprise, because that business was using the true value of its financial reports.
What you can’t see really can kill your business, which is why it is important that you, as a CEO, try to reduce time on operative duties, and start being a business owner. Essentially, what financial reports do for a business is what blood test results do for a doctor. The information provided allows you to analyze the hidden trends that make your organization work.
Monthly reports will allow you to understand what works
The first step you need to be talking to guarantee that you can sustain your business is that you need to get your monthly financial reports published and read. Then, you need to interpret them and understand where the profit it coming from, or shockingly, what is stopping potential profit. You may not even know it, but that bank loan you took out months ago might be creeping up, leading your business to bankruptcy.
Look underneath and identify the problems that are destroying the business
The moment you are able to analyze the financial reports, you should start comparing profits for each month. If they are uneven, or worse, slowly decreasing, there’s a problem your business needs to identify and kill off immediately. You might have started fresh due to the novelty your business provided, but after reading the reports you notice that employees have been leaving your business frequently, and that less and less work has been done ever sequential month. You, as the CEO, have to find a manager who can keep the work going without constant employee turnover.
Plug profit leaks
Since you may not having been checking out your reports, but there may have been a difference between the prices your goods are actually worth and the value they were sold for. This is detrimental to your business! Imagine the loss your business would have been going if you had known that your products were being sold for less than their genuine worth.
Customers and investors form the future
The future of your business depends on how much capital and profits you can sustain in the long term. If you are not publishing your reports annually, at the minimum, then you will lose the chance for customers to turn into potential investors as they have no statistics to work with.
Identify positive trends about your business
You may have hit the jackpot when it comes to customer retention, but since you had no knowledge about who was buying what at, how consistently, you never capitalized on such a trend. But now that you have the ability to identify your loyal customers and offer them a bonus!
Hiring a Chief Financial Officer (CFO) is a must for long term growth
You’re running a company, and it’s likely you won’t always have the time to read the reports. This is what your CFO would do for you. He/she will manage the business’s finances, financial planning, and risk management so that your business can make the right decisions to bring in even more profit.
Tools and scoreboards will stop killing profits
Effective business tools and activities will bring in efficient results. With the right tools, you’ll be able to launch projects that will allow your organization to branch out and expand. With the right tools, your CFO may be able to identify the financial metrics and stop problems destroying your cash flows.
When it comes to business, hard work does not mean your organization will survive. You have to go above and beyond, and see what makes your company thrive. The ability to take the guesswork away, and move toward analytics is what will allow your business to grow.
For more information, you can also check Entrepreneur’s post.