For a moment, let’s think back to when we were kids and started to read for the first time…did we immediately start reading words?
No. it all started with pictures.
There is the age-old saying that reads: “A picture is worth a thousand words”.
Pictures created a visual reference point that over time, we started to associate certain words with.
They convey emotion, intent, outcome, and even process. In many cases, the picture on the page would have taken many pages of words, to have conveyed the same storyline.
Now, fast-forward a few years and books have suddenly become hundreds and hundreds of pages long. Gone are the 10-page books that gave us hours of reading pleasure. Pictures have now been replaced with a river of words, seamlessly flowing from one page to the next.
So, it begs the question: “Has reading become any less enjoyable without the pictures?”
Not in the least. I reckon we can now be thankful for this process that has enabled us to be a lot more creative. We now possess the superpower to turn words into visuals, as we can play out the story in our mind’s eye as we keep flipping pages in the book.
Now, if this is the case for reading books, how come it is completely different for business owners “reading” their management accounts?
In our experience, we encounter two categories into which we can place small business owners, many of them being first-timers.
The one group has no idea how their business is performing…there are no management accounts to speak of. They navigate day-to-day by looking at the balance of their bank account.
On the other side, you have those that are on the receiving end of accountants smashing out what they refer to as “management accounts”; printouts of a Profit and Loss, Balance Sheet, and Trial Balance.
It’s like asking a grade 1 pupil to read Macbeth.
It’s just numbers everywhere. But what do they mean? What story are they telling?
Most business owners accept this as their status quo. Whether they form part of a group of 1 or 2, either way they end up managing their bank balance. Simply because they don’t know how to interpret what they know as “management accounts”. I mean, how could they not? This is the only reality they know.
That is, till they meet with the ThriveCFO team…
Imagine if we took a similar approach by starting to understand business performance in a visual manner first!
Instead of trying to make sense of debits and credits, let performance charts and graphs unlock a whole new visual representation of how healthy your business really is. Let these visuals unlock the good and not-so-good of how you’re actually doing.
Adopting this approach creates a visual narrative that allows you to better understand your business. It is extremely powerful to have information at hand that allows you to better prepare for the next steps in your business. As exciting as surprises sometimes are in your personal life, they can conversely have many negative impacts on your business, due to you being ill-prepared.
Just like it was a joy to look at the picture book that unlocked happy emotions, you know you’re doing pretty ok when your management accounts unlock the same emotions.
It’s when the pictures that glare at you from the other side of the paper or Mac stir you in a negative way, that you know there is some work to do. It’s only when the visuals aren’t to your liking, that it requires a deep dive into the numbers that make up that picture to figure out what the root cause of the problem is.
Visual reports allow you to see the overall picture of your business performance. From there you and your accountant can go as granular as you want to in order to address specific problem areas, instead of analyzing your whole business all at once.
Top 3 questions to ask
So, in closing, I would suggest you ask your accountant for a visual representation of the following 3 aspects of your business and you should already have a much better handle on your business finances:
- What is my monthly break-even point, in other words, how much do I need to earn to cover my expenses?
- Do I operate in a cashflow positive or negative manner?
- In which months and on which accounts, have we spent in excess of or earned less than our budget?
This ongoing “reading” of your story needs to be a monthly exercise at the bare minimum, as it allows you to change the numbers on a frequent basis, which in turn allows you to read a pleasant, happy story.