Which report is important? Which report for your company’s results needs to be reviewed? Summary review or in detail? How often?
Are you scratching your head with these questions, regularly, wondering which report is the right report to read at the right time.
You know reports are important. ( Well, hello?) Of course. But considering how many companies…ignore their reports eventually to their demise, it seemed important to say again. (And maybe you’ve waivered in the past.)
Here’s my suggestions for reports to review and how often. There are books and college courses prepared to discuss each report and how to use them.
It is not the definitive list. Add your suggestions. We can create a list that could become a definitive list. There are two categories:
1. Financial Statements
2. Operations Reports
For these I’ll turn to Scot Justice, CPA and MBA. Scot has been in the trenches and has the war wounds every small business owner suffers. He blogs at VirtualCFO . His Twitter handle is VirtualCFO . His post The Financial Statements Small Business Owners and Entrepreneurs Need to Use  is an excellent post. He lists 4 reports. I’ll add my thoughts on how frequently you should review them and why.
Income Statement – Shows the revenue, expenses, and the profit/loss of your company for a specific period of time.
Frequency: Quarterly. Scot may disagree here. Income statements are most important for your accountant to help you with your tax filings and SEC filings. But, other reports, particularly the cash-flow statement or sources and uses of cash report, more accurately report the results of your operations, particularly those of a small business or startup.
Balance Sheet – Shows the financial position of your company on a specific date. This includes assets, liabilities, and owner’s equity. (Scot Justice) Included in those assets is your cash balance. Included in your liabilities are your obligations and their approximate due date under the headings of Long-Term (more than one year) and Short-Term (within one year).
Frequency: Monthly – quick review to manage your cash balances and short-term liability payment schedule. Quarterly: detailed review for future financial planning needs and to insure consistent, accurate, reporting from other reports.
* Cash-Flow Statement.* Cha-Ching! This report is the most important report for small businesses and startups. Small businesses and startups have more difficulty generating the cash needed to fund their operations from traditional resources.
Cash is king. Cash-flows make you kings or paupers.
Cash may be a very close second most important asset for a startup or small business. Second behind its human assets. Why? Human assets, your company’s talent, are the assets that deliver your brand. However, no cash and your talent is forced to focus on finding it, not growing the brand.
This report would be the one report to study if you could study only one report. It is that valuable.
Frequency: Monthly: In detail. (Daily review would not be too frequent.) I drove my accountant crazy drilling into its details. And doing that helped us replace cash-flows from dwindling retail prices as our industry became commoditized. There’s gold in that cash-flow statement. Look very closely in your cash-flow statement. You’ll find it.
Make yourself VERY familiar with your cash-flow statement. Be its BFF and I mean forever. Do that. And you’ll remain king of your domain.
Statement of Owner’s Equity – Shows the equity you have in your company on a specific date. Equity is basically the value of the investment you have in your company. – Scot Justice
Those are your 4 financial reports.
There are 5. These you should review, in detail, monthly. Compare them with the results from last month, last quarter, last year. Why? They are the proverbial wellspring source for the numbers that show next month in your cash-flow statement.
* Conversion Rate
What percentage of leads or prospects does your team convert to paying customers? By team, I include Customer Service and Accounting, IT and Executives, along with Sales and Marketing.
Which sales person generates the highest percentage? Why? How? What can you share with others to improve their results?
Which sales person generates the lowest percentage? Why? How? Have you trained them properly, motivated them correctly, incentivized them meaningfully? Have you asked? If you answer yes to all, maybe this partnership is not productive.
* Customer Churn
Also, look to their reasons for why they left your company. You do ask them why they left, right?
How many? From what source? What is the result? A new customer? A recurring customer? Customers with high percentages of bad debt?
Sustaining businesses generate high numbers of referrals. From that perspective, your purpose is to generate referrals. Do that well and you sustain your operations. the impact of a growing number of referrals is reflected in your leads, your customer churn and your conversion rate.
It is also reflected in your employees’ motivation. Referrals serve as a tangible source of positive feedback that is very meaningful to your employees.
* Customer Service Requests
How many? What reason? How frequently do you see that reason? Why? Email or phone call? Phone calls are used when it’s urgent. What results? How many emails and phone replies are required?
Make your customers happy and their response is reported in your Referrals report. Make your customers unhappy, repeatedly, and their responses are included in your Customer Churn report. Reports tell the brand’s story. Understand their language, understand your story and understand the story of everyone in your company. Understand your reports; understand the doors that are open and closed to you.
Reports tell the past, present and future for your brand. The past is told with the decisions your team and your partners make every day. The present is the snapshot tally of all those decisions, made every minute, that become a pattern. And that pattern is recognized in these reports. The future is up to you. What’s done is done. But these results in these reports point out the distance that remains to reach your goal.
* * * * *
About the author: Zane Safrit’s passion is small business and the operations excellence required to deliver a product that creates word-of-mouth, customer referrals and instills pride in those whose passion created it. He previously served as CEO of a small business. Zane’s blog can be found at Zane Safrit .