Accurate financial reports are essential for making key business decisions. How do you know if your financial reports are accurate? This article discusses the critical areas of business performance and how to ensure your metrics are meaningful.
No doubt you rely on your financial reports for many of your key business decisions. Of course, there will be a range of metrics that you rely on to understand how the business is performing, but it is the financial reports that are your final arbiter of your business’s performance.
Some of the critical performance areas you will want to know in detail are:
- Are you achieving your sales targets?
- Which business segments are performing to expectation and which are not?
- Are you achieving targeted gross profit margins?
- What gross margins are being achieved in the different business segments?
- What is causing gross margins to vary from your budget targets?
- Do you have each category of overhead expenses completely under control (e.g. remuneration costs, sales & marketing expenditure, occupancy costs, etc.?
- Do you have a good understanding of where your cash is coming from and where it is going to?
- Are you managing working capital and capital expenditure within the constraints of the business’ capital position?
For you to make the best management decisions for your business you need to know what to address and how much it impacts on business profitability. To do this you need accurate financial reporting.
Are your financial reports accurate?
Our experience with small and medium sized business is that financial reports are rarely accurate. We commonly see profitability figures bouncing around from one period to the next. As a result, managers cease to trust these reports. Once this happens they stop using one of the most productive management tools in their business. Management decisions become more based on perception than reality. This is a dangerous position for the business to be in.
Why your financial reports are not accurate?
There are many reasons why small and medium sized businesses have inaccurate financial reports. To be fair, the size of these small and medium sized businesses often means that they either cannot afford to recruit highly experienced financial managers or they may struggle to attract these professional financial managers.
The limited access to experienced financial management resources usually results in financial reporting that is inaccurate. Improvements in technology and the emergence of contract professionals such as virtual CFOs is now providing small and medium sized businesses with access to this important resource.
How can you determine whether your financial reports are accurate?
ceefo has developed a 20-question diagnostic that any business can take to assess how accurate its financial reporting actually is. Each question requires only a yes, no or not applicable answer.
Simply click on the link below, provide your response to each of the 20 questions and you will receive a complimentary assessment of the accuracy of your financial reporting.
If you would like to speak with us further in regards to this important topic area please get in touch at our Contact Page!