Mark It On Your Calendar (September 2006)

Over the past several months, I’ve talked about the importance of focus, control and planning for an organization. Hopefully, something in my monthly emails has caused you to think about how your business operates. But more importantly, I hope that it has caused you to do something differently. If so, great!

But if not, let me challenge you to do something differently right now! Book an appointment on your calendar for Friday morning, September 15th from 9:00 AM until 11:00 AM. Send the appointment to your controller, bookkeeper, CPA, or whoever prepares your monthly financial statements. Tell them you want to spend two hours together reviewing August results.

Tell them to come prepared with the monthly income statement, balance sheet and statement of cash flows. You also want to see month-month trends on the income statement and balance sheet from the beginning of the year. Ask how August results differed from July and why? Did you have a budget or plan? If so, how did August compare?

Start at the top! Review revenue (and each line item if you have more than one). You don’t just want to know the amount of the difference, but why it was different? What can be done to drive revenue?

Understand each expense line item as well. Were expenses up or down for a reason? What can be done to improve the ratio of expenses to revenue? Which line items are “fixed” (do not vary with short term volume changes) and which line items move relative to changes in revenue?

Look at the balance sheet! Are receivables being collected? Are vendors being paid in a timely manner? Were there any investments in capital equipment? Are you booking depreciation on a monthly basis, and are you covering the costs of wear and tear on your fixed assets so that there is enough money in the bank to pay for new machinery and equipment when your current equipment needs to be replaced?

The cash flow statement explains the difference between profit and changes in cash. Admittedly, it can be difficult to read the first time. Muddle through it if you must. You’ll understand it better next month.

Finally, what was the return on the capital you have invested in your business? Was it sufficient for the risk that you’re incurring or would you have been better off putting your money into CD’s? If you own and work in the business, have you been fairly paid for the time that you’ve invested?

By the way, if you’re told this information isn’t available, that’s a big, red flag! Find out why, TODAY!

If you need help with your business, financial plans, or goal setting, please give me a call at (314) 863-6637 or send an email to And, remember . . .
Your Cash Is Flowing. Know Where.

Copyright @ 2006 Homza Consulting, Inc.


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