Here is the power of historical financial reporting in helping a business grow. I have a practice I do with most of my clients which is at the end of the month, we look at the financial reporting records of the organisation to see the trend of the business.
For a particular client, when we looked at the sales, we noticed that the sales was highest at the first 10 days of the month and started to fall off gradually. I asked the staff what they could infer from that trend. One of them pointed out that most of their customers were civil servants and that they have more free cash to spend at the first few days of the month. Based on this information, we resolved to increase our marketing within the first few days of each month.
We looked at the financial reporting of the expenses for the month and noticed that a particular expense had suddenly jumped by 200%. We made a resolve to immediately get an alternative for that particular expense. Financial reporting records are critical to the success of your business because that is the only way you can know the truth about your business.
I consult for a lot of small businesses and most of them call me when they are having serious financial challenges. My first question has always been let me see your financial reporting records and this always helps me to know if the business owner can get help very fast.
Helping a company that has been keeping proper financial reporting records is more like treating a serious infecting in a patient who came to you with a lab test he did, even if he can not interpret the meaning of the result.
A lot of pharmacy business owners truly need financial support to grow their businesses but they fail to realise that its only when they have evidence of how they have been running the business which can only be found in their historical financial reporting records will any investor take you seriously.
No business owner should ever complain about how bad business is for him or her if he or she does not have a truly reflection of why business is bad or why its okay. this information can only be accessible to them if they have been keeping financial reporting records.
I am however baffled at how some businesses that keep the financial reporting records rarely look at them. How will you know the expense item that has suddenly increased and is draining resources immensely from your business?
How can you know the items that are giving you the greatest returns if you do not bother to look at your financial reporting records.
I will strongly suggest you start to do something about proper financial reporting records. I once wrote about how we noticed N500,000 missing from a client’s business that was less than six months old when I called in auditors to get the net asset value of the business.
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