How often should you be reviewing your financial information?

Financial information only becomes relevant in your business if you take the time to review it.  Sounds simple right?  You’d be surprised how many business owners don’t review their financial information enough, or even at all.  I’m talking everything from profit and loss statements, balance sheets, pricing strategies, cash flow … and the list goes on.  One of the questions I often get asked from business owners is how often is often enough when it comes to reviewing financial information?

I’m the first to admit that each business demands different reliance on financial information at different times, but I’m also the first to admit that if you’re not reviewing your information at least monthly, you aren’t doing it often enough.  And this is just at a minimum.

I say this often as it is such a key component to understanding financial information, and that is that the information you are reviewing is past information.  Your money has been spent, obligations committed, sales made … its been done.  So reviewing your information after a period that exceeds a month (at least) limits your ability to do anything about what the information is telling you.

So what would the information be telling that’s so important?

1.     Whether your sales exceeded the costs it took to make them – did you make money?

2.     What percentage of sales were spent on your selling costs?

3.     Do your liabilities (obligations) exceed your assets?

4.     Do you have enough cash to pay for your costs?

5.     At what point might you run out of cash?

6.     Did you perform better than last month/quarter/year?

7.     Which sales item is performing the best in your business?

And the list goes on!.

The simple reality is, if you aren’t reviewing your financial information on a timely basis, you’ll miss the opportunity this information is presenting to you, to make any significant impact on your business for its future. 

So if you choose to review your information monthly, pay close attention to the following;

1.     Sales trends that are emerging.

2.     Cash flow trends.

3.     The impact your product / service margins are having on your cash balance.

4.     How much stock you may be holding.

5.     Whether your assets still exceed your liabilities and by how much.

6.     If your profit hits your forecasted targets.

Just to name a few.  However, each of which, when answered and explored correctly, can set the scene for the coming months / year.  And when thinking about this information and it’s impact on your businesses future, can you afford not to take the time to review it regularly?

Just a thought.