In preparing financial statements can be a task, but if you look at them as a source for holding yourself and your workers responsible for the bottom line, they become very useful sources.
Do you feel the feeling that you are preparing financial statements because you’re oblique to? That’s you are preparing financials for the reason that the bank needs of them, or CPA said it is the exact thing to do, or because you have them to file your tax returns?
This is an interesting perspective to share with you. Showing the real reason why preparing the financial statements is applicable. And it has nothing to do with the bank or the IRS. It has the whole thing to do with YOU.
Here is the word that’s the best explains the purpose of financial statements — accountability. Your financial statements assist you hold yourself and the people who work for you accountable for results.
It could assist you get what you want from your business.
The simplest form of accountability is about what you said when you were going to do — and how did you truly do against that goal or obligation.
The Formula for Success
Accomplishments in business (or life for that matter) are about following this formula.
- Set a clear goal.
- Create a specific plan to achieve the goal.
- Implement the plan.
- Measure your progress against the plan
- Change as necessary to achieve the goal
If you are not using this formula, you are not the manager of your business. Likely, it is the business managing you. And that’s a recipe for failure.
The financial statements play a big role in measuring your progress against your plan. And that is where the accountability comes in.
Here is an equivalence to exemplify the point.
Let us say your son or daughter goes home at 11:30 at night. Is this right or wrong?
The answer depends on when they said they would be home. If you both agreed that they are home at 10:30, that’s bad. If both agreed they would be home at 12:00, they are scoring some major points, right?
What did you say you were going to do and what did you do?
The similar thing is relevant to managing your financial outcome. If making money is one of your goals, then you have to hold yourself responsible by becoming maniacal about evaluating your performance every month.
You have to see accurately what results you produced match up to what you required to create. That is what your financial statements expose to you. Then you can choose if you require doing anything different in the prospect to guarantee you get the financial results you want.
In the monetary side of your industry, you plan a budget; produce a plan to attain that budget, and then compute your development every month adjacent to the budget you have planed. From the time you have evaluated what happened vs. what you wanted to have happen; you decide what you require to do further for what you need to do less of in order to achieve your goal.
That is what you must do in order to develop your business and gain the money you desire and deserve to make.
Same thing applies to the individual who employ for you. The person has the accountability for attaining financial outcome in the business, and then follows the same formula. Place an objective (with their input preferably), observe definite results every month, and provide any coaching or motivation to hold them accountable for results.
You will be surprised how much more efficient you become when you start looking at your financial statements as your major way of getting what you want and be worthy of your business.
Not using or making financial statements is just like buying a lottery ticket then saying “I don’t need to know what the winning numbers were.” You would have shattered your time and your money by buying the ticket then, in result, creating it useless by not finding out if you got what you wanted.
That would be the meaning of madness.
Create a pledge to yourself to use financial statements to get what you want from your business. Apply the budget to set exact financial goals then measure every person in your association against those goals every month.
You will be astonished how responsibility will gather speed of accomplishment of your objectives.
