We meet with a lot of Business owners and CEOs. There are two things we preach when reviewing financial statements.
Net income does not equal cash.
“I made $1 million in net income, why didn’t I see my bank account increase by this amount during the year?”
You are not seeing the full picture if you only look at the income statement. The answer is typically found in your balance sheet. Your income statement is a more detailed schedule of the net Income line item in the equity section of your balance sheet.
There are many items on the balance sheet that affect your cash flow.
You can influence your bottom line more than you think.
Yes, there are many external factors out of your control that will impact your bottom line (economy, competition, weather, etc). But when we work with companies, we realize the most dramatic impact to the bottom line results from changes within your own company.
Here are a few examples:
- Changing sales compensation plans to align with company goals.
- Investing in ways to slow down turnover.
- Analyzing profitability by project/product/segment and focusing efforts on more profitable work.
- Identifying goals and related KPIs and setting up a process to measure and discuss.