Financial mastery is the same worldwide
Finance BY ROD BRISTOL
Account Ability
Financial mastery is the same worldwide
I have just returned from a three-week trip where I presented programs for a client in India , the Philippines , Malaysia , and Singapore . I then went on to present two additional programs for a client in Australia who has many multi-unit restaurant owners . My mission was to present our Profit Mastery curriculum to them to drive up their financial acumen and introduce them to our online curriculum .
You might think that the financial issues of an owner of multiple businesses in India would be different than those here in the U . S . Amazingly enough , finance is the same the world over . If you can ’ t get your profit to the gross margin line , it will never , ever drop to the bottom line .
And if you don ’ t follow the 10 basic processes that allow you to get better information from your financial statements , you will never have the data necessary to manage a business more effectively . Here are the 10 ways to get better information from your financial statements .
1 . Group your profit-and-loss expenses by category such as sales and marketing expenses , occupancy , etc . and not alphabetically . You would be surprised how many financial statements are so poorly organized that it is impossible to get real data from them .
2 . Have your profit-and-loss and balance sheet statements produced on a monthly basis . It is absolutely unacceptable to have financial information presented to you , the owner , on a quarterly basis . You are already three months late , so if something bad is going on inside your business you are way behind in getting it fixed .
3 . Get your financial statements in a timely manner . The minimum acceptable standard for financial reporting today is a monthly profit-and-loss and balance sheet presented to you by the 15th day following the close of business of the previous
Amazingly enough , finance is the same the world over .
month , every month . There is no other minimum acceptable standard .
4 . Have your financial statements reviewed by a CPA on a regular basis , not just at tax time . This is especially important if you are unsure of the quality of the financial information you are receiving from your bookkeeper . In a future column I will share with you the 13 Red Flags to Bookkeeping Fraud , which can help you know if someone is stealing from your business financially .
5 . If your franchisor has not already provided you with it , create for yourself a point-of-sale system that ties into your financial statements so you know your true inventory numbers .
6 . Know your real gross margin percentage by knowing your true inventory number . ( See # 5 .)
7 . Try to minimize what you put into your “ miscellaneous expense account .” I have seen many profit-and-loss statements where this account is approaching $ 100,000 . Absolutely unacceptable ! You should know where that money is going , because if it ’ s going to someone else it ’ s not going to you !
8 . Avoid having too many categories , or at least have P & L and balance sheet reports that roll up into one page . It ’ s perfectly acceptable to have many subcategories to provide you with details regarding specific line items . However , it is absolutely critical to have totals that give you the clear picture of where the money is going .
9 . Have your P & L and balance sheet show both dollars and percentages so you can see whether any changes are caused by changes in volume or true increases in costs , and then compare them to industry standards . This is one of the areas where so many business owners fall short in their financial reporting . Financial information expressed in percentages is critical for competent financial analysis of the trends in your business . 10 . ( And this is the tough one !) If your accountant or bookkeeper can ’ t do all of the above , get them trained , better advised , or replaced .
Finally , if you have
3 years of data available , the most professional way to organize your financial information is to have the previous 2 years month-by-month compared with your current month , then your previous year data compared to your yearto-date results this year . This gives you the maximum ability to access trends and see where there are opportunities for you to drive up the financial performance of your business .
Rod Bristol is executive vice president at Profit Mastery . For over 30 years , franchisors and franchisees have improved their financial performance and unit profitability by following the Profit Mastery process : financial training , benchmarking , and accountability / bankability modeling . Learn more at www . profitmastery . net , 800-488- 3520 x13 or email bristol @ brs-seattle . com .
82 MULTI-UNIT FRANCHISEE ISSUE III , 2017