I want to tell you a real-life story about a highly trained professional who made good money. But as her business grew, she felt a lot of extra stress, had days when she didn’t have enough cash to pay the bills and actually had LESS profit. Her business was growing, but she worked harder then ever before and was making less money.
Two Hours Changed Her Business Life
She had a service-based company with employees. When the company was small, she could keep all the figures in her head. But as her business grew it reached the point where she couldn’t keep track of it all. She realized the importance of bookkeeping and had that function done for her, but she never took the time to interpret what the financial statements meant.
We looked through the months of financial statements for the key lever points in her financial statements.
Where had she been the best at converting income into cash?
Where had her group of professionals provide the best service for the lowest cost?
Where did she have the best control of her monthly expenses?
From those we picked representatives of the best for each category. Since we can produce ‘common size’ financial statements with Cash Flow Accounting, it makes this type of analysis much quicker and easier. Common size is a CFO term that refers to a way of looking at your financial information in terms of percentages and per unit costs, instead of just straight profit and loss numbers. It makes trend analysis much easier and more meaningful.