A good friend accuses me of reading bank statements for pleasure. It’s true!
Financial reports give us a unique picture of our activities. As we go about our daily activities in business we are taken up with the immediacy of talking with customers, and with the focus on delivering our special products or services, and paying the bills, and dealing with the landlord, and … and … and attending to all the myriad details which are part of running a business.
Financial reports give us a totally different perspective on all that daily activity. They can give us a moment of stillness in amongst all that. It’s a bit like standing outside a window, looking in on our business. Inside the window everything is very brightly lit like a stage set – every aspect is highlighted in sharp detail.
The sharp lighting means that we can see everything very precisely – the numbers are definite and exact. And because we are standing outside, we can see the whole scenario in one sweep – we can see how all the various strands of our business relate to each other, and go together to create a complete picture.
But at the same time, it is only one view. Financial reports enable us to see our whole business from a very specific angle. It’s not the same angle as the marketing angle, or the product-delivery angle, or the staff management angle. It’s the angle of our money – where the money has come in from and where it’s gone out to, how much we have at the moment and where it currently sits.
Financial reports give us access to this complete picture of our money. They enable us to see the flows of money through our business, and the shapes and sizes of those flows. It’s very reassuring and very clarifying to have such exact and comprehensive knowledge about out money.
One report gives us a static picture, like a snapshot. What starts to make it really exciting is to get a series of financial reports across time. It’s like looking at a series of time-lapse photographs of the same scenario. You can gradually see how the scenario changes, how it can slowly morph from one state to another.
But the final piece of excitement is coming to understand how you, as the business owner, can look at the current scenario, see what you want to change, and then go ahead and make those changes – so that when you get the next set of financial reports, you can see how the actions you took had an effect on the scenario the reports describe.
This really is Empowerment with a capital E! Not only do you as the business owner have the power to take action. In addition, financial reports give the added dimension of their precision and completeness to help you decide which actions are best to take in order to achieve your desired goals. You are in a position to make informed and thoughtful decisions which take into account all known factors. You no longer need to react. You don’t have to spend your days fighting bushfires.
The key to this empowerment is being able to read financial reports. This requires a little bit of specialised knowledge. Because I love reading them I’ve learned to be able to read a wide range of reports. But the only reports you need to learn about are the reports about your own business – which is not such a big task.
One of my greatest pleasures with clients is making my specialised knowledge available almost like interpreter or translator, working with the client to bring into sharp focus the view of their activities which the financial reports point to. Getting the numbers to tell the story of your business.
But in keeping with my ethos of spreading the empowerment around, I get equal if not more pleasure from helping people learn to read their own financial reports. For most people, the best way to learn is by doing, and running a business is one of the best places to learn by doing!
Most people start to get a pretty good grasp of their financial reports over 3 reporting cycles – that’s over 3 months if you do your accounts monthly. Or 3 years if you do your accounts only annually. If you want to speed up your learning, we can look at past reports too. Most of the learning just happens in our conversation as we look at the reports together and discuss what the reports tell about your business.
Financial reports are tools for empowerment when the simple numbers on a page are understood as real and concrete information about your business. With this information you are then in the driver’s seat – able to make informed decisions, make proactive plans, carry them out, and measure the consequences.
That’s why I love financial reports.