Additionally, management reports answer many key sales and operational questions, such as:
- Who are the new customers and prospective sales?
- How quickly is inventory turning over?
- How much is spoilage or waste affecting profitability?
- What is the delivery lead time, and how is it affecting profitability?
- Can we implement just-in-time operations to reduce inventory?
Successful businesses generate and understand the data provided in these reports and have a well-documented monthly closing cycle.
A small-business owner should make use of these results and have a process in place to take appropriate steps to correct any deficiencies found at the close of business each month. The foundation of the FlowFirst management model enables and facilitates optimal financial flow.
It is a process that generates the financial statements and management reports needed to answer the three essential questions of optimal financial flow. And it is the process that enables rapid and effective monthly financial closing procedures.
Next Steps to Financial Success
Begin to answer the three financial flow questions by analyzing business performance on a monthly basis.
Put processes in place that deliver the information needed to evaluate key business performance indicators. Include reconciliation of balance sheet accounts, bill entry, inventory analysis, expense accruement and the analysis of accounts to compile the data necessary to generate complete and accurate financial analyses.
Management reports are also vital to financial flow, and by combining them with financial statements, small-business owners can get a comprehensive overview of their financial performance to answer the three questions for optimizing financial flow.
With the right information and processes in place, you can take the steps to improve your small business!
This article was co-authored by Mark Kaufmann, consulting technical writer.
About the author
Alexander J. Hart of Cuban American decent is principal and founder of Hart Vida Raffo. With over 25 years of experience, Alex specializes in the areas of tax strategy and planning, business process improvement, and capital consulting. Whether advising on capital and financing strategy or consulting for privately-held professional services firms, Alex has the expertise and practical know-how to help any company optimize their business processes and make tactical financial decisions. He began his career at IBM in sales operations and accounting. He was a Controller for the N.Y. Post, has been a CFO for a medical device company, and has written a tax column called “Ask the Tax Guys” for Micro-Cap Review. Alex is a professional member of A.L.T.A. (Affiliated Lawyers of the Americas), a member of the National Association of Tax Preparers, and is a contributing author and mentor at Latin Business Today. Alex graduated from St. John’s University with a B.A. in Spanish and his M.B.A. in Finance. He obtained his accounting degree from Pace University.Website