What do all the Reports Mean? Are They Useful?
“Here are your figures” – and with that a large, nicely bound wad of paper is passed reverently to you in your meeting.
Cover everything? Bloody well hope so!
Is it right? Bloody well hope so!
Is it useful? Well………
OK, so we all understand that we need to do financials and tax returns at the end of each financial year – we need to as the Tax Office needs us to lodge our tax returns. Your bank will also want them. But do YOU, as the person who owns the business that needs these reports actually understand what’s in them?
Over time, people will develop an understanding as to what’s in the reports and become able to use them to varying degrees of sophistication. The real issue is that a lot of the reports that are done are historical and don’t actually help much in the planning for the business going forward.
For this reason, we’ve been working with a number of our customers on establishing new protocols and reporting structures that revolve around useful information and budgeting that bears some direct relevance to the business. We’ve developed our own product that provides not only budgeted profit and loss statements, but also budgeted balance sheets (monthly) and, critically, a budgeted cashflow. This enables us to monitor the performance of the business as it trades through the year and also allows us to make better decisions about resource allocation, staffing and capacity constraints and opportunities and investment decisions.
Many businesses try to make “as much money as possible”. With respect, this is crap. How will they ever know how they’re going against this target? How will they ever know when they’ve got there? By going through a deliberate, process driven exercise, it is possible to design a meaningful set of goals for the business. From there, it’s all about planning and doing – you’ll be surprised just how far this will get you if you do it. BUT you need the right reporting mechanisms to enable you to determine how you’re going against those goals.
In the end it’s all about getting and using reports that are meaningful and useful. Much of what is required to be prepared to keep the ATO happy isn’t much use for the business owner/manager in planning ahead. You need other tools which are specifically designed for that task – not designed for the task of hsitorical reporting.