A new client expressed surprise at how little time we spend on reviewing his financial statements. Let me let you in on a little known fact: your monthly financial statements aren’t very effective at running your business.
Why? Many times they are prepared weeks (albeit months) after the close of a period. And while they provide good historical data, they are no indication of how the business will do in the future.
So what we need are reports that tell us what’s going on right now and what is likely to happen in the near future.
The 3 Reports Every Successful Business Owner Should Have at Their Fingertips
Here are the most important reports you should be able to quickly produce:
1. The Flash Report- real-time pulse of the business
The flash report is an aggregation of data from many different sources provided on a periodic basis. Every business is unique and will require different data; but it might include:
- Current cash,
- Open accounts receivables (aging)
- Open accounts payables (aging)
- Month-to-date and year-to-date sales
- Backlog
- Open purchase orders
- Open quotes.
For every number there would be a “comparison number” which could be last month, last year, or current budget. The purpose is to quickly determine how the business is doing in a “flash”.
2. The Pipeline Report- future revenues
The pipeline data is rarely in your accounting system… but rather in the place where you track your future business opportunities. The core data on this report would include:
- Opportunities
- Leads
- Quotes
The data is expressed as dollars using a weighted average approach. Pipeline reports detail all open opportunities as some version of “hot,” “warm” and “cold”. It shows the dollar value of the opportunity, the date it’s estimated to close and the “weight” or chance it will turn into a sale. It also shows who’s working on the opportunity and the historical and future tasks that need to be done to complete the opportunity.
The pipeline report is the tool for managing your sales forecast and serves as a critical recap of your potential future revenues.
3. The Rolling Cash Forecast report- cash is king
Hands down my favorite report. Successful people are always looking ahead. They don’t like surprises. They want to know what’s coming, so they can make decisions in advance and better manage the future to the full extent. Sales are important, but in the end, it’s all about cash. This report takes data from multiple places and combines it into a future predictor of cash flow- profit and loss by month, balance sheet by month, changes in cash by month.
Clients are skeptical when I share their first Cash Flow. But within a few months, they don’t know how they would ever run their business without it.
