financial statements

5 Secrets Hidden In Your Financial Statements

Gene Marks

Did you know that within your boring financial statements are five hidden secrets that could have a significant impact on your business? Some of my most successful clients have figured this out. By understanding these things, they’re better able to manage their cash flow and interpret the numbers necessary to make profitable decisions.

So what are these five secrets?

Secret 1: “Flash Reports” are more valuable than financial statements.

As a CPA, I’m used to being referred to as the “mortician of numbers.” That’s because we’re always looking behind. Financial statements, by the time they’re prepared, reviewed and blessed, are almost always out of date. My smartest clients read their financial statements regularly and look for trends and anomalies, but they’re always making business decisions based on real live data. And that data usually comes from a “flash report.”

A flash report has — daily or at most weekly — key metrics that put the business owner’s thumb on the pulse of his or her business. It has daily cash balances, open accounts receivable amounts, year-to-date sales, and upcoming orders. It’s the key metrics you need to really know what’s going on right now to help you make decisions for the future. These metrics are always compared to prior amounts for a benchmark. The report is easily compiled by an administrative person. When used the right way, you’ll find your flash report to be much more valuable than your financial statements.

Secret 2: Cash isn’t what it seems.

When you see your cash balance on your bank statement, don’t kid yourself into believing that it’s the actual amount of cash in the bank. That’s because cash isn’t what it seems. Your bank doesn’t know what cash is coming in or what payments are still in process. So when you see your bank balance, it’s always out of date.

So is your book balance. That’s the balance showing on your financials. This cash balance may not be what you think either. For it to be real, it needs to be reconciled, so make sure you have someone outside your company reconciling your book balance to your bank balance every month. There will be timing differences and other items that someone may have missed. It happens all the time. Cash can be a tricky thing — make sure you completely understand why your book and bank balances don’t agree.

Secret 3: Your real business is in your general ledger.

Ever read your general ledger? You should. Because it’s only in the general ledger where you will find the true details about your business. And, like my grandmother used to say, the devil’s always in the details! The general ledger is the underlying “diary” of your business. It’s here where every transaction is recorded. It’s here where you will see every single thing impacting your company’s cash flow. Your financial statements are merely a summary of what’s in your general ledger. Your general ledger has all the juicy info.

So once a month, print out your general ledger (maybe it’s 30 pages) and go through it manually with a pen. Seriously. Circle items that you don’t recognize or look unusual. Ask your accountant about them. You’ll almost always get a reasonable answer. But your eyes will be open to the type of things that you’re spending money on, as well as the people you’re doing business with — both customers and suppliers. Once you know your general ledger, you’ll really know your business.

Secret 4: Projections are more valuable than your financial statements.

As I wrote above, your financial statements give you insight into the past. That’s interesting. But what’s more important is the future. My successful clients are always looking ahead. So while they do read their financials to better understand their businesses, they’re leveraging that past data to build forecasts so that they can see what’s coming.

And doing this isn’t so tough. Just take your year-to-date financial statements, put them on a spreadsheet, and figure out the next 90 days ahead. Knowing your expenses shouldn’t be too hard. Payroll, utilities, rent, maintenance — most of this stuff is the same. Your margins can be estimated (a forecast is not an exact science). What’s challenging is figuring out your sales. But you can do this using past data, pipelines, open orders, and discussions with your sales team. Again, it’s only 90 days into the future.

Once you have a reliable process for putting together regular forecasts, you can get the best of both worlds: using your past financial statement info to generate predictions for the future.

Secret 5: You don’t need an audit, but you should get a review.

Consider bringing in a certified public accountant to look at your numbers. If you have a good CPA (you can find a firm through your state CPA society or a good referral), then you’ll have the advantage of someone with a financial background digging into your numbers, comparing you to other companies in your industry, and pointing out items of note.

CPAs do compilations, reviews, and audits. Unless you’ve got outside investors or lenders, you generally won’t need a review or audit. Professional standards require CPAs not to offer any opinion on a “compiled” financial statement, where they’re basically taking your internal records, like your general ledger, and creating financials for you. But good CPAs will still offer advice, recommendations, and counsel based on what they see, even with a simple compilation. That kind of guidance is critical and can go a long way in helping you better manage your business – and understanding your financial statements.

In summary, your financial statements hold some secrets. These secrets aren’t known or used very much by most business owners. But my savviest clients know them. They know to use flash reports, read their general ledger, reconcile their cash, create projections, and lean on outside help from a CPA. They do this to unlock all the value that financial statements can provide.

Check out Gene’s cash flow PDF below:

*The information expressed in this pdf are for informational purposes only and do not constitute an endorsement by or necessarily represent the views of The Hartford or its affiliate.

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74 Responses to "5 Secrets Hidden In Your Financial Statements"
    • Steve Duke | July 30, 2022 at 8:46 am

      Please add me to the list of pdf requests. Thx

      • Small Biz Ahead | August 1, 2022 at 3:46 pm

        Hi Steve, we’ve linked the pdf at the bottom of the article so you can download it there. Thanks for commenting and reading SBA!

    • Ed Stakem | July 28, 2022 at 1:14 pm

      These are great. Please send me a pdf of this presentation.

      Thank you in advance.

      • Small Biz Ahead | July 28, 2022 at 2:43 pm

        You’re welcome, Ed! We’ve linked the pdf at the bottom of the article so you can download it!

    • Dave G | July 28, 2022 at 9:47 am

      If it’s not too much trouble, I would like an email of this article as well.

      Thank you.

      • Small Biz Ahead | July 28, 2022 at 2:44 pm

        Thanks for the comment, Dave! We’ve linked the pdf for the article at the end so you can download it!

    • Mark Perrone | July 27, 2022 at 8:14 pm

      May I also have a PDF of the article “5 Secrets Hidden In Your Financial Statements” sent to my email?
      Thank you very much

      • Small Biz Ahead | July 28, 2022 at 2:45 pm

        Hi Mark, you can download the PDF at the end of the article. We just uploaded it there!

    • Kevin Reed | July 27, 2022 at 6:03 pm

      May I have a pdf of this article? Excellent information!

      • Small Biz Ahead | July 28, 2022 at 2:46 pm

        Yes! We just uploaded the PDF to the article at the end. You can download it there!

        Thanks for reading SBA!

    • Scott Kaminski | July 27, 2022 at 4:24 pm

      Could I please receive a PDF of 5 Secrets Hidden in Your Financial Statements.

      • Small Biz Ahead | July 28, 2022 at 2:46 pm

        Hi Scott, you can download the pdf at the end of the article. We just uploaded it there!

    • Deb Gory | July 27, 2022 at 1:35 pm

      This article is so insightful. May I also have a pdf of the article?

      • Small Biz Ahead | July 28, 2022 at 2:47 pm

        We’re so glad you liked it, Deb! We just uploaded the PDF to the bottom of the article so you can download it there. Thanks for reaching out!

    • Octavio Romero | July 27, 2022 at 11:22 am

      May I have a PDF of the 5 Secrets article?

      • Small Biz Ahead | July 28, 2022 at 2:47 pm

        Yes! We uploaded the pdf at the end of the article so you can download it easily there. Thanks for reading SBA!

    • Clarissa Nowlin | July 27, 2022 at 11:14 am

      I would like to have a pdf of the 5 secrets article as well.

      Thanks

      • Small Biz Ahead | July 28, 2022 at 2:48 pm

        We’ve uploaded the pdf at the bottom of the article so you can download it there. Thanks for commenting!

      • Clarissa Nowlin | August 3, 2022 at 2:31 pm

        Once your schedule allows, I would love to receive a pdf this article. Thanks so much!!

        • Small Biz Ahead | August 4, 2022 at 8:18 am

          Hi Clarissa, you can download the pdf at the end of the article! We just added that feature!

    • William Bransford | July 27, 2022 at 10:57 am

      I get a daily FUDDY sheet, for lack of a better word. It has month to date sales, current receivables, payables, bank balances and other accounts that could or would effect my daily decisions. The report was created by my bookkeeper whom worked for my CPA for years. Pretty much a Bible for my daily decisions.

      • Small Biz Ahead | July 28, 2022 at 3:06 pm

        Thank you for sharing, William!

    • Satheesh | July 27, 2022 at 10:40 am

      Could I also get a PDF version of these secrets? Thank you for the great insight!

      • Small Biz Ahead | July 28, 2022 at 2:49 pm

        You’re welcome! You can download the pdf at the end of the article. We just uploaded it there!

    • Lee Hammett | July 27, 2022 at 10:03 am

      May I have a PDF of the 5 Secrets article?

      I appreciate it.

      • Small Biz Ahead | July 27, 2022 at 10:39 am

        Yup! We just sent it over to your email.

    • ANGELA PINEIRO | July 27, 2022 at 9:54 am

      I would also like a PDF of this article.
      Thank you!

      • Small Biz Ahead | July 27, 2022 at 10:41 am

        Hi Angela, we just sent the PDF over to your email!

    • Cuauhtemoc Roldan | July 27, 2022 at 9:16 am

      Thank you for the great information presented here–I also wish to receive a pdf –thanks!

      • Small Biz Ahead | July 28, 2022 at 2:50 pm

        You’re welcome! Thank you for the nice comment!

        You can download the pdf at the bottom of the article. We just added a button for it there!

    • Peggy Bishop | July 27, 2022 at 8:57 am

      Please email me a pdf of this as well.

      • Small Biz Ahead | July 28, 2022 at 2:52 pm

        Hi Peggy, we just added a download button for the pdf at the bottom of the article. You can download it there!

    • Tina Watson | July 27, 2022 at 8:15 am

      Hi,
      Could I get the pdf on this article .

      • Small Biz Ahead | July 28, 2022 at 2:51 pm

        Yup! We uploaded the pdf to the bottom of the article, so you can download it there!

        Thanks for reading SBA!

    • Kevin OLaughlin | July 27, 2022 at 8:13 am

      Would also like a PDF of this. Thank you

      • Small Biz Ahead | July 28, 2022 at 2:53 pm

        Hi Kevin, you can download the pdf at the bottom of the article. We just uploaded a button for it there. Thanks for commenting on SBA!

    • Trisha Crittenden | July 27, 2022 at 6:53 am

      Hello, I would like a PDF version of these secrets. Thank you in advance!

      • Small Biz Ahead | July 28, 2022 at 3:01 pm

        You’re welcome! We just uploaded the pdf to the end of the article. You can download it there!

        Thanks for reaching out!

    • Gwendolyn Tidwell | July 26, 2022 at 11:32 pm

      Can I please get a PDF of this information

      Thank you

      • Small Biz Ahead | July 28, 2022 at 3:02 pm

        Hi Gwendolyn! You can download the pdf at the bottom of the article. We just added it there. Thanks for reaching out!

    • Daniel McGeoen | July 26, 2022 at 10:01 pm

      Could I receive a PDF by email of this article

      • Small Biz Ahead | July 28, 2022 at 3:00 pm

        Hi Daniel, we’ve uploaded the pdf to the end of the article. You can download it there!

    • Donna giillmeno | July 26, 2022 at 9:17 pm

      Thank you for the advice

      • Small Biz Ahead | July 28, 2022 at 8:58 am

        You’re welcome, Donna!

    • Norman Rosenblatt | July 26, 2022 at 8:54 pm

      As a former CPA, I found your presentation both informative and entertaining. I like your writing style, dude!

      • Small Biz Ahead | August 1, 2022 at 3:50 pm

        We’re glad you liked the article! Thanks for commenting!

    • Oluwaseyi O Sobowale | July 26, 2022 at 5:58 pm

      Great advice appreciated.
      Please can you email me in a pdf form.
      Thanks

      • Small Biz Ahead | July 28, 2022 at 2:57 pm

        We’re so glad you liked the advice! You can download the pdf at the bottom of the article. We just created a button for it there.

        Thanks for reaching out!

    • Barbara Kilgore | July 26, 2022 at 1:56 pm

      Please send me a PDF version of these secrets. Thank you

      • Small Biz Ahead | July 28, 2022 at 2:56 pm

        Hi Barbara, we just uploaded the pdf to the bottom of the article. You can download it there! Thanks for reading SBA!

    • Rowena Finegan | July 26, 2022 at 1:43 pm

      I’d love a PDF version too, please! Thank you

      • Small Biz Ahead | July 28, 2022 at 2:55 pm

        Thanks for reaching out! We just uploaded a download button at the end of the article where you can download the pdf.

    • Howard Goldstein | July 26, 2022 at 11:35 am

      Hello good article I would like to get the PDF to share with my staff.

      Thank You

      • Small Biz Ahead | July 28, 2022 at 2:55 pm

        We’re happy to hear that you liked the article, Howard! We just added a download button for the pdf at the end of the article. You can get it there!

    • Lyn Greenhill | October 27, 2021 at 1:24 am

      Gene,

      Could I also get a PDF version of these secrets?

      • Small Biz Ahead | October 27, 2021 at 8:56 am

        Thanks for commenting, Lyn! We just sent you the PDF via email.

    • Christina Book | July 23, 2021 at 10:34 am

      Could I please have a PDF of this presentation?

      • Small Biz Ahead | July 26, 2021 at 9:55 am

        Hi Christina, thanks for reaching out! We just sent you the PDF via email.

      • Marvin Fleming | July 27, 2022 at 8:27 am

        Please send me the pdf of the 5 Secrets.

        • Small Biz Ahead | July 28, 2022 at 2:51 pm

          Hi Marvin, thanks for reaching out! We just uploaded the pdf to the end of the article. You can download it there!

    • John WYNNE | July 21, 2021 at 8:36 pm

      Hi Gene,

      Can you send me the pdf of the 5 secrets.
      I’d appreciate it.

      • Small Biz Ahead | July 23, 2021 at 10:20 am

        Hi John, thanks for reaching out! We’ve just sent the PDF over to you via email.

    • Janu Orrick | July 20, 2021 at 11:33 am

      I’m curious, when you give the owner the general ledger, is it in cash or accrual basis? Or is it up to the owner?

      • Gene Marks | July 20, 2021 at 3:22 pm

        It’s up to the owner. A business chooses which basis to be on – tax rules also figure into this.

    • Ramiro Torres | July 14, 2021 at 1:48 pm

      Can I have a PDF of this presentation

      • Small Biz Ahead | July 16, 2021 at 3:07 pm

        Hi Ramiro, thanks for reaching out! We emailed the presentation over to you!

        • Jason campbell | July 26, 2022 at 10:48 am

          Can I have the pdf also?

          • Small Biz Ahead | July 28, 2022 at 2:53 pm

            You can! We uploaded a button at the end of the article where you can download it.

    • Terri M Villalva | July 14, 2021 at 10:59 am

      Good morning Mr. Marks,

      When creating a “Flash Report”, how do I insure I am grabbing the same info?
      Our software is Ajera (Deltek) and I would love to create a Dashboard that makes a GREAT flash report.

      Please let me know if you have any templates that would be beneficial.

      Thank you,

      Terri

      • Gene Marks | July 19, 2021 at 8:05 am

        You should talk directly the people at Ajera about doing this – they probably already have templates. Be prepared to potentially hire a consultant to assist setting this up – it may set you back a few hundred bucks but it’ll be worth it.

        If you don’t make progress with Ajera, remember you can have an admin do this manually. You just need to determine what data you want to see daily and where the admin can find it.

        Hope that helps.

    • Maria Solaita On Cue Interpreters | July 14, 2021 at 9:06 am

      Thank you

      • Small Biz Ahead | July 14, 2021 at 12:40 pm

        You’re welcome, Maria!

    • John Sbordone | July 14, 2021 at 3:34 am

      This article was enlightening.

      • Small Biz Ahead | July 14, 2021 at 12:41 pm

        We’re glad you enjoyed it, John!

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