When we think about value we usually think about it in terms of worth or importance to us. This can have different connotations depending on what area of life we have in mind. For example, on a personal note, quality time spent with my family is of the utmost value to me. In business, helping my clients’ companies achieve the highest level of success possible is very high on my list of values. As you can see things of value take on different meanings and priorities with different people depending on what’s important to them.
There is something, however, of real value that every business needs. In fact, it is so valuable that the survivability of the business can hinge on whether this item of value is used consistently. It is simple but absolutely critical. Here it is:
- The consistent review by management of timely and accurate financial statements.
Here is what the above statement means. Every month, at a minimum, by the 15th at the very latest, the previous month’s Profit/Loss Statement, Balance Sheet, and Cash Flow Statement should be reviewed, analyzed, and understood thoroughly. There are many good reasons for doing this but the most valuable reason is so corrective action can be taken immediately to begin to strengthen the areas of weakness in the business that is revealed in the financial statements. Many companies have woefully underperformed or failed because they have neglected this step. This is a simple but critical task every business, regardless of its size, can do at a minimum. Business owners, make sure that people within your company are assigned this responsibility or get outside help if necessary.
Again, something of real value, the consistent monthly review of timely and accurate financial statements.