When you look at your monthly financials, you get a snapshot insight into how your business did in the previous month. It is helpful to also have the YTD figures on your monthly statement but these are the absolute basics.
Obvious changes like inventory, accounts payables and receivables can be spotted right away. Other trends might not be so easy to see but some simple math equations can cure that.
Let's take a look at sales. The Gross Sales number will be on the financials but what is not on there is just how profitable those sales were. Sure, the bottom line is there but it doesn't tell you much. This is where the math comes on. Rather than just reporting the gross sales figure, work on a ratio that might be more meaningful to your business. For a service business, this could be gross sales divided by payroll. What ratio are you striving for? What ratio is acceptable and what isn't? Is there a ratio you need to achieve and could you tie a bonus program to this? In manufacturing you can formulate similar meaningful ratios. You might want to have a ratio pertaining to sales vs the cost of carrying inventory.
