Many years ago I had the opportunity of hiring a talented and caring chief financial officer by the name of Garry Carter, CPA who during the interview process said to me, “Brad I’ll give you good information, and I’ll trust that you will make good decisions.” I learned quite a bit from Garry over the years, and I credit much of my success today to his mentoring.
The following are a few points I would like to make that I believe help entrepreneurial firms grow faster, smarter and—most importantly—more profitably. First and foremost, I think it is important to stop “guessing” and start “knowing.” Having a good data gives you the ability analyze your business in a way that gives you great confidence in your decisions. I believe that organizing the data provides an opportunity for your people to understand your business results and to know what actions to take for improvement.
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Preparing your financials and your key performance indicators in a graphical fashion makes it much easier for the non-financial manager to be able to read and understand. In turn, that provides a basis for your people to more accurately act on the data. Preparing a graph particularly helps people see the data in a different light and understand it better. It is one thing to present the data, and it is another for people to be able to understand the data. We are looking for understanding and appropriate action.
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Additionally, I am a very large proponent of preparing your financial statements and reports in a trailing twelve month format as it provides a positive element in your reporting. This format removes seasonality, meaning you’re always looking at a whole year. In order for the graph to tick up, you would have to have the current month performing better than it did for the same period one year ago. Basically meaning that the same month must to be better than it was in the previous year. When you achieve that graphically, your people begin to see that up is good and down is bad, simple and clear. You remove the ups and downs of seasonality, and you get a very good indication of how a business is performing.
Great data helps you make great decisions and avoid poor ones. A series of great decisions helps you make a great business.