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Build Consistency through Financial Controls

Monte Wyatt & Brad Sugars, Aug 22, 2019

A company’s financials tell its story through its numbers.

Financial controls are a component of the Discipline of Execution, which creates consistency in an organization.

Financials include: income statements, balance sheets, statements of cash flow and financial ratios, on a monthly, quarterly and an annual basis.

When you understand those figures, you'll know where the company has come from and where it's headed.

Too many businesses don't know their numbers. Every business executive, leader, and manager should be looking at them every week, if not daily.

To get an accurate picture of a company’s progress toward its financial goals, or to make required adjustments, we need real-time information, or as current as we can get.

Here is a brief look at the four main financial reports that will paint a true picture of a company.

  • First is the income statement. This is often referred to as a Statement of Profit and Loss, or P&L. The income statement shows a company's generated revenues and incurred expenses over a set period. It also shows the net gain or loss for the company during the accounting period.
  • Second is the balance sheet. The balance sheet gives you a snapshot of the company on a single date, most often the last day of a quarter or year. It also shows the accounting value of all the company's assets, liabilities and shareholders’ equity on that date.
  • Third is the cash flow statement. The cash flow statement is an analysis of all activities during the accounting period that dealt with cash, particularly the activities that affected operations, financing, and investments.
  • Fourth are financial ratios. You calculate financial ratios from the figures in the financial statements. You use these ratios to analyze the relative financial health of the company. You can compare ratios over time within the same organization to spot trends and to evaluate risks. Financial ratios provide a deeper picture of your organization. You can use many different ratios depending on the nature of your business

These are just the basics, but they’re essential to know in order to fully understand your company.

Financial reports, goals, and budgets are all important to predict and to track results. But it’s the actions that people take that create results. On a regular basis, you must measure the actions that lead to results. Remember, what you measure you can improve.

Good management measures outcomes to ensure that the company meets its goals. Good management works to improve one number at a time. Then they set about improving the next one.

Managers are not the only ones who should know their numbers. All of your team members should know how they affect their departments or organizations financials. This gives everyone clarity regarding the impact they’re having on their department and, by extension, the entire company. Remember, a company’s story is told through its financials. And everyone should know the story.

To recap, a company's story is told through its financials, which are a component of the Discipline of Execution, which leads to consistency. Your financials include income statements, balance sheets, statements of cash flow and financial ratios, on a monthly, quarterly and an annual basis.

We'd love to hear from you. How do you feel your contribute to the bottom line of your company on a daily basis? Thank you for sharing.