The key message is that business owners should analyze financial statements to identify issues, consider alternative scenarios to address problems, and track metrics over time to evaluate changes rather than just filing statements without review.

1. Here’s Your Financial Statements -
Now What Should I Do With Them?
Jacqueline Miaso, C.B. - President
Delta Business Solutions
Certified Bookkeeper, Certified QuickBooks ProAdvisor
Your accounting professional has just handed you the
financial statements for the last reporting period. If you
are like many business owners, you may be tempted to
say thanks and just file them without review with the
rest of your documents - just in case someone like the
IRS may want to look them over.
That’s a mistake. Inside properly prepared financial
statements lies a wealth of information that can help you plan the future of your business.
Financial statements should not be treated as some historical document but as a planning tool
for improved future profitability.
Let’s look at an example from a client that we recently worked with to help them plan for the
future. This business is a specialty retail store that was not pleased with overall earnings. We
proceeded to analyze the cost elements and it was clear that by far the highest operating
expense item was rent. There were good reasons for this. The property was located in a very
high traffic location with easy access and ample parking as well as a very large footprint.
By investigating ways to minimize this expense, the discussion turned to other specialty stores
that had a product line that would complement their offerings. We identified one store in
particular with a location that was not as favorable and developed several alternatives using
the P&L Statement as a basis to explore the effect on the bottom line of proposing to share the
existing space (a totally feasible operating option) with the other business.
We prepared a pro forma Financial Statement that showed a modest rent sharing agreement
would increase profitability by twenty-two percent. We also estimated several levels of in-
creased sales that could occur due to the increased traffic relating to the synergies of similar
customer bases buying product that might not otherwise occur. A modest four percent increase
in sales due to this effect combined with the rent and utilities reduction would result in an
ncrease to the bottom line of thirty-seven percent!
Sure, it may seem like good old common sense, but until you use existing financial statements
as a basis for evaluating future changes, you are just guessing. You can explore many
alternatives on paper to determine what the outcome of a business decision might be. And
once a decision is made, you should continue to track results on a periodic basis against the
actual result so, if need be, you can make appropriate course corrections.
This is just one example of how using actual numbers to explore the effect of changes to cost
elements can have on the future profitability of your company. Use the information that you
have to identify problem areas within your company, and above all, monitor and track at least
three key metrics on a monthly basis.
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