Many businesses tend to use their business checking account to measure their financial situation. If there is money in the account, they are doing good, and if there is very little money, then the opposite is true. To some degree I can see that this simplistic approach makes sense for a very small business, but it certainly doesn’t work for a business that has other challenges, such as vendors, inventory, lots of employees, sells on credit terms, etc.
The other common challenge with financial information (or lack thereof) is the timeliness of getting this information. With the advances in technology, it is reasonable to have financial information no later than 10 days following month end.
Financial information is key to help drive any business, without the proper and timely information, the CEO/Founder may not know how to improve the business and consequently continue doing something wrong.
Your CFO should be able to not only provide you timely financial statements (no more than 10 days after month end) but more importantly he/she should be able to describe the “story” behind the numbers. Telling you that sales are below forecast is a no brainer, the real question is why and what needs to be done. Same with expenses, anybody can compare prior month with current month trends and find out what the difference is, but the real benefit of having access to a CFO is to be able to identify specific actions that can be implemented to bring expenses in line.
Have you CFO identify, measure and monitor the corresponding KPIs for your business. These operational indicators are like gauges in your vehicle, they provide some insight on what is working and what is not.
