Financial statements can paint an important picture for use in managerial decisions. Some examples of ways that business owners can use financial statements include:
To analyze past performance – Financial statements can be a powerful diagnostic tool business owners can use to evaluate their firm’s strengths and weaknesses. This can pinpoint areas that require more focus
Increase Profits – Analyzing the trends of certain expenses may help flag areas that can benefit from cost reduction strategies for an increase in profits.
To budget for the future – Financial statements can be used to determine your future expenses, and the required sales level to meet those needs as well as to budget your short term cash requirement.
To make strategic decisions – Financial statements can help business owners make the decision of whether or not to invest in new equipment, expand or contract the size of operations, to move to a larger or smaller facility and much more.
To determine employee bonus structure – Profit sharing is a great way to provide employee incentives. Your financial statements can help determine the structure of an employee benefit plan and if there is enough profit and cash to implement this incentive.
So the next time you get your financial statements back from your accountant, why not sit down and review them for a while, you might discover something you didn’t know.
This article originally appeared in the April 2011 edition of The Beal Business Advisor. The newsletter also includes:
- Buying a Business
- Selling Your Business
- Quote of the Month
- Businesses Available for Sale and
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