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Understanding the value in financial reports

Financial Reporting:
What to Look For

Good financial decisions stem from quality financial and operational reports. Therefore, it is important to know how accurate financials benefit your company and what to look for in your reports.

Accurate financial reports and related dashboards provide regular health checks that highlight areas that are performing as expected and those needing improvement. Working with monthly versus annual reports enables you to create an action plan to meet your company’s goals. 

When reviewing your reports, the two key areas to look for are:

  1. Financial Drivers
  2. Financial Impactors

Financial Drivers

First off, what is a financial driver? Drivers are internal and external factors that have a direct relationship with the performance of your business and often help set and achieve business goals and objectives.

Businesses are encouraged to look at the following financial drivers:

  • Cash
  • Sales
  • Break-even sales
  • Gross profit (GP)
  • Contribution margin (CM)
  • Earnings before interest, taxes, depreciation & amortization (EBITDA) 

Financial Impactors

Financial impactors are factors that could result in a business having expenses that are higher than the revenue it is generating – resulting in that business operating at a financial loss. While there are many factors beyond our control, it is important to know what the financial impactors are to try and mitigate risk.

The main financial impactors to consider are:

  • Revenues – dollars and volume
  • Pricing and customer acquisition strategy
  • Costing & cost management
  • Capacity
  • Supply chain
  • Labour productivity – efficiency and turnover
  • Cash management
  • Industry trends

Understanding the financial drivers and impactors of your business is crucial to the longevity and success of your business, and will aid in major decision-making. Ultimately, knowing what to improve in your business will help drive the value of your organization. 

With this in mind, it’s important to have quality financial reports that are customized to your company’s needs and follow accounting standards and best practices. Organizations of any size can now have quality financial statements prepared at affordable costs.

Looking for financial guidance?

Start a conversation with one of our advisors to see how SB Advisory can support you in your business goals.

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