19 Ways to Survive in a Tough Economy. Lynn Spry

to get a more complete financial picture. For instance, from the profit and loss statement it is easy to see that interest was paid; however, it is not possible to see what the current loan amount is. The balance sheet shows the loan amount as of the date of the balance sheet and the profit and loss statement will record that interest on the loan during the period reviewed.

       Sample 2: Profit and Loss Statement

      3. Cash Flow Statement

      You need to watch the cash flow statement closely. The cash flow statement tells you how much cash (i.e., real money) comes in and how much goes out each month. It is possible for a business to make money (based on the profit and loss statement) and still have serious cash problems. The cash flow statement will identify if this is an issue for your company. For instance, your profit and loss statement will tell you how much money you make, but paying down loans, such as company vehicles, or purchase loans will not be included as an expense. Therefore, reviewing what your cash position looks like each month will help you prepare for purchases and other cash events.

       Sample 3: Cash Flow Statement

      After you have completed all three statements, they can be read together. In this case, you can see that even though the profit and loss statement says the business is making $3,500 per month, the cash flow analysis shows that there will only be an additional $500 in the cash account at the end of the month. From the cash flow statement, coupled with the profit and lost statement, it is easy to see where the extra $3,000 in “profit” is going:

      • $11,000 in inventory purchases on the cash flow statement that were not included in cost of goods sold on the profit and loss statement

      • $1,000 for the loan principle

      • $1,000 for the owner’s draw

      From this, the numbers seem more reasonable. In the last month, inventory has gone up, debt has gone down, and the owner took some money out of the business.

      Lifesaver: If you aren’t at all familiar with accounting, you are not alone. Many business owners start out with little knowledge in this area. If you need help creating financial statements, or if you want another pair of eyes in interpreting these documents, there are many experts who can help. Your accountant, bookkeeper, or mentor can give you a valuable perspective on these reports.

      4. Other Types of Reports to Help You Stay on Top of Your Business

      Just because the three financial statements you need are usually produced on a monthly or quarterly basis, doesn’t mean that you have to wait to figure out if your business is running off course. There are other reports that you can review on a daily or weekly basis that will allow you to stay on top of your business. If you have an accounting program or point of sale system, chances are these reports are all included.

      4.1 Daily and weekly margin report

      The margin report should indicate how profitable the business sales actually were. Alone, this report will tell you how much your business makes on a day-to-day basis. If you couple this information with your business’s budget, you will be able to see on a daily basis if your business is profitable. To do this, just use your budget and estimate how much your company has to make each day to cover the monthly business expenses. Regularly keeping up with this information will help you guide your day-to-day activities. If you aren’t seeing the profitability you were expecting, you can immediately make the course corrections necessary to become more profitable.

      4.2 Daily and weekly gross revenue report

      The gross revenue report shows the gross sales that the business makes each day. This report will mainly be used to communicate your sales goals to your staff and to determine how well they are doing meeting those goals. Of course, it is not always easy to determine exactly what gross revenue will result in the appropriate margin. Therefore, this report should be reviewed daily at first and compared against the margin report. If your business is meeting the sales goals you have set, your margin should be sufficient to meet the monthly overhead. If your margin is lower than expected, you can immediately adjust the sales goals or make other business changes to prevent a loss for the month.

      4.3 Detailed inventory report

      If your business requires you to keep inventory, it is important to manage it correctly and track it regularly. If you do not have products available for sale, you risk losing the sale. Depending on how much your company stocks and how quickly the stock runs low, you may need to review your inventory every day, but probably not less frequently than every week.

      Of course, a report is only as good as the data in the report. As part of your inventory management, make sure you are doing a full manual inventory at least once every quarter or else these reports could be providing poor or misleading information.

      4.4 Customer surveys

      Another way to get quick information about what your customers like, dislike, and want is through brief customer surveys. These surveys can be formal, with a customer survey form included at the register, available online, or even as a flyer included with all purchases. Or, they can be informal, conducted by you alone on an as-needed basis. However you choose to do it, getting your customers’ candid opinions about your business is an invaluable way to monitor your company.

      When you have customers complete a formal survey, you may want to thank them with a discount card. This type of “reward” not only will encourage more people to fill out your surveys, but they will also be more likely to return to your store to make another purchase so that they can use their reward!