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Navigating the economic uncertainty we are facing has been like navigating a river’s tumultuous rapids—twists and turns that blind you from seeing what is coming next, with the constant threat of a dangerous impending drop up ahead.
Last month, we took a deep dive into the revenue portion of the profit and loss statement (P&L), but that is only half the equation (pun intended). As discussed, revenue is always where any financial analysis should begin because business owners and CFOs need to know how much money is coming in before they can start looking elsewhere. But a close second is then understanding how much money is going out of the business.
It’s not uncommon that a business owner thinks they have an understanding of their financials because they vaguely know the numbers on their profit and loss statement (P&L). And while, yes, that’s a great start, it’s not enough to truly understand what’s behind the numbers generated neatly on that common—and crucial—financial report. How did the numbers get there? What do they really mean?
Being proactive is one of the fundamental keys in business. “Acting in anticipation of future problems, needs, or changes,” as the definition of the term tells us, is crucial for any business owner. We shouldn’t sit idly by and wait for something to occur in order to prepare an appropriate (or at stressful times, an inappropriate) response. While those situations may be unavoidable from time to time, most often, they’re not … when we’re appropriately anticipating them.
December always seems like an appropriate time for reflection. As we close out one year and look optimistically to the next, we can’t help but consider how we got here to plan where we’re going. For us, as we reflect on the past twelve months, we are incredibly thankful for all our clients, strategic partners, and the incredible opportunities that presented themselves to us.
When business owners hear the word “bookkeeping” (or any variation thereof), they automatically think balance sheets and profit and loss statements. They wouldn’t necessarily be wrong, as bookkeeping is inextricably tied to those important reports. But more and more today, there is another meaning attached to the term — a meaning with roots in something that has become a new norm in business and society — e-commerce.
Businesses continue to face unprecedented challenges in our post-pandemic world. The aftermath of this trying time is filled with businesses that, although able to survive, continue to struggle with issues surrounding technology, rising prices, and inventory, to name a few. However, business owners need not face these difficult issues alone. To that end, we’ve compiled the top three post-pandemic challenges faced by businesses today and how a CFO can help overcome them.
While understanding revenue, expenses, and profit is crucial for any business owner, cash flow is an equally important metric in truly understanding a business’s financial health. Cash flow, representing the movement of money both in to and out of a business bank account, can be positive or negative, and will fluctuate as the business shifts and expands. A positive cash flow is just as it sounds—more money is coming into the account than leaving it. A negative cash flow, in contrast, means the exact opposite—more money is leaving the account than coming in.
It’s fairly apparent to most business owners that we are no longer in an economy where we can fly by the seat of our pants. The days of coasting are over (but really, never should have begun in the first place). There is simply too much volatility in the economy today, forcing business owners to take a new approach. Yet, financial uncertainty and doubt plague many of them.
We talked last month about the traditional functions of a Chief Financial Officer (CFO); namely, tracking revenue, profit, and cash flow, analyzing financial strengths and weaknesses, and proposing corrective actions. These functions allow the CEO to better understand how to increase revenue, decrease costs, and become more profitable overall.
