How your financial statements can guide you through these challenging times.

May 19, 2020

Let’s talk about the boring side of your business. Financial statements and cash flow analysis are things that may scare and intimidate business owners because they do not know how to use them.

Businesses today are challenged in ways they have never been challenged before. Understanding and embracing your financial statements will give you the knowledge and tools to steer through these periods.

Financial documents tell a story.

You are not a bookkeeper or a CFO. You started your business because you are passionate and excited to offer a product or service to people. It may be something you have dreamt about for years. Now you are faced with running the business and making financial decisions. These three financial statements will deliver insight into the current health of your business in addition to a window to what the future holds.

Profit & Loss Statement (Income statement). Simply put, it indicates how revenue, not cash, is transformed into the Net Income or Profit. This is the result after all revenue and expenses have been accounted for. P&L Statements can reflect a certain period or on an annual basis.

        Cash Flow statements and projections. Cash flow is the life blood of your business. The cash flow statement shows you where cash is being generated and spent. It helps determine how many days of cash on hand you have before things turn. It is a vital piece of the information you need about the health of your business, especially in these challenging times.

        End of Year Projections. (This is our happy place to work with nonprofits and businesses to determine the best and worst-case scenarios.) A projection will allow the business to pivot and amend and update budgeting and expenses based on the situation at hand. Tools include reallocation of funds, updating your budget and spend, and most importantly gives you control to make strategic decisions.

Understanding these three financial statements, while intimidating, empowers you to take control of your business and make sound financial decisions.

Strategy, not reaction.

During this pandemic and social and economic pause, nonprofits and for-profit businesses came to a screeching halt. No bad decisions were made, no monumental loss, just a hard stop. How does that affect a business and the decisions the owner or board will make? The first thought is to react. We must do something. Yes, you must. You need to take a breath and gather your team along with the three financial reports mentioned and begin to unpack your financial suitcase.

Planning for September in May is healthier than quick decisions. Your mind is clearer than it would be if you waited until September to react. Working with financial statements presents a true and clear picture of the company’s financial wellbeing. From here you can make decisions and monitor the effectiveness of those decisions closely to determine the impact on the business.

These are difficult and challenging times.

Face these challenges head-on and fully informed. Capital CFO created and delivered a Zoom webinar on May 5th,  entitled, “Putting Your Financial Pieces Together.” You can view the webinar here, password CapitalCFO1!. Information is powerful and we are here to share what we know about financial statements and using them to understand your business.

Contact us and give us your email to receive the templates with formulas for these three financial statements. We wish you health and success and perhaps have facilitated you to become more comfortable with understanding your financial statements.

Sabrina@capitalcfollc.com