Frustrated, Angry, Confused? Get Intimate with your BS.

“The rich focus on their asset columns while everyone else focuses on their income statements.” 
― Robert T. Kiyosaki

Income statement, balance sheet, and cash flow statement.  If you own a business, you better have an intimate knowledge of these financial reports.  You need to know them, live them, and be able to explain them.     

In one of my father’s last moves of owning his company Thompson Insurance, he made sure I had a good “numbers person” at my side.  My “CFO”, bookkeeper, or keeper of all things financial joined me the first day I began buying my company from my father and without “Betty Lou” I don’t think I’d have the success I’ve experienced.

Betty Lou and I have known each other since birth.  Her mother was my father’s right hand and I guess in my father’s mind, it only made sense that Betty Lou would be my right hand. 

In addition to Betty Lou, I became a student of learning about our financials.   I took classes offered by local banks to help me better understand our financial standing and how we might improve.

It wasn’t until I joined a business peer group that I really began to understand and be able to explain the financial statements of our company.

If you want to learn something, teach it.  When serving on the peer group I was forced to review, defend, justify, and explain my financials to other business owners. 

I was asked questions that I did not know the answer to.  I would make notes, I would then go back and sit with Betty Lou and discover why we were amortizing various items, or why an expense item was up 24%.

Once we receive our financials, my partner and I review.  We get a lot of data.  Comparisons to last year, percentage changes from year to year, information that tells us where we might be headed in the next few months.

If you are a business owner, I highly recommend you begin taking an interest in your financial statements. I know many business owners who leave that part to “the accountant”, but you have to know this information if you are going to succeed.

Today I sit in a peer group in Denver, CO.  My board members and I review each other’s numbers on a monthly basis.  We are asked questions about our financials that challenge our current financial management and I leave every meeting with a deeper understanding of our next “plan of action”.

Financial statements are boring, but they are the difference between success and failure.   If you own a business, schedule an appointment with your accountant today.  Begin wrapping your mind around your income, expenses, cash flow, assets, and liabilities. 

How much cash do you have in the bank?  My partner and I have been very diligent about putting cash back in our business.  We strive to keep a substantial amount of cash on hand.

Most businesses operate on a line of credit, we don’t.  A line of credit should be used, paid off, and then used again.  If you company runs on a constant line of credit never paying it off, you have some work to do. 

I’m not a financial genius, but after 20 plus years of owning my own business, I am confident in my management of our company’s financial outlook. 

One of my mantras is to work on your business more than in your business.   If you are not intimate with your financials, start that process today.  Make an appointment with our accountant, have them explain each form, what it does, how it impacts your business.  Don’t be embarrassed, most people don’t know the workings of these reports, but once you do, you have a competitive advantage over most other people in your industry.   

“The rich focus on their asset columns while everyone else focuses on their income statements.” 
― Robert T. Kiyosaki