Recently due to some bad weather I decided to take some alternative transportation to my office.  With not having to drive, I had the opportunity to observe some things I might not normally see.

As the car motored along the interstate I looked up and saw an intersection on a city street that had more signs than Unilever has brands.  Signs like ‘No Turn on Red’, ‘Yield to Bus’, ‘Stop Here on Red’, ‘Cross Walk’…well, you get the picture.  I thought to myself why do we need all these signs to make it around each day as we go about our lives.  And are there so many signs that we miss the important one –the one that if we miss it will cause an accident or maybe take us down a wrong road?  What purpose does each sign play—safety, direction, and control to name a few.

The signs are there in business as well. Timely and properly prepared financial statements provide the best source for these signs.  Do you know where to look for the signs on your Balance Sheet and Income Statement?  If not, ask for help from your CPA or a knowledgeable business friend who does, and can help you understand what you are seeing.  Some signs are apparent; others require some analysis.

It may sound simple or elementary, but your financials might be telling you to STOP or to proceed with Caution.  Don’t miss the sign that says next gas station is 150 miles up the highway (speaking to those under capitalized businesses).

Other reports that augment your financials that contain signs include customer sales history, vendor performance, and cash flow analysis.  These reports provide information on customer buying trends, how your vendors are doing, and you should always know that there will be cash, and plenty of it, in the bank.

It’s important to be aware of what is happening in your business, and where to look for both the positive signs and warning signs.  Be sure to take the appropriate action when you see the sign(s).

Copyright 2018 Clouser On Business


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