08/05/2022
STATEMENT OF FINANCIAL PERFORMANCE.
Earning a profit is likely high on the list of things you want your business to accomplish. To determine if you are actually earning a profit requires knowing a lot more than just how much money you brought in that month. Determining profit means looking at things like the company’s assets, expenses, income and equity on a regular basis. These should all be reflected on your company’s statement of financial performance, which documents all areas related to finances so you get the big-picture view of where your company stands.
Why You Need a Statement of Financial Performance
There are many reasons why businesses need a statement of financial performance. Generally, a statement of financial performance is important to understanding if your business is profitable and, if not, where to make needed changes. It shows the current financial status of your business, how cash is used and where the unnecessary costs are.
How to Improve Financial Performance
After all of the calculations are in, you may find that the statement of financial performance isn’t showing the profits you expected. This can be disheartening to anyone who invests a lot of time, energy and money into their business enterprise, but there are ways to improve the financial performance of your company:
Maintain ongoing financial statements. One of the best ways to improve financial performance is to regularly review how your business is doing. Instead of preparing the statement of financial performance annually, you may want to do it quarterly, or even monthly, to see where improvements can be made. What you don’t want to do is make rash decisions based on one bad month, so be sure to look at financials month-to-month, quarter-to-quarter or year-to-year to make the most informed decisions.
Be proactive. With regular financial performance statements, you can see if things are operating as efficiently as they should. With ongoing financial statements, you can get a sense of what is currently happening in your company, what is going to happen, and if any changes need to be made. Being proactive can save you a lot of money and positively impact your bottom line.
Have a realistic budget. One of the quickest ways to improve financial performance is to have a realistic budget. Don’t spend a lot of money in areas that don’t make sense, since it will negatively affect your bottom line. Make sure you have a budget that is realistic and in line with company goals. When you work within that budget, you may see the financials move in the direction you want.
Price your products correctly. Know how much your products are actually worth on the market by doing competitor research. If you can increase the price of your product or service, you may be able to see immediate improvements in the company’s financial performance, especially if costs stay the same.
Set achievable goals. In addition to a realistic budget, make sure your goals are achievable. Don’t try to provide services you don’t have the resources for. Don’t try to double your profits within one month. What you want to do is strategically plan where to invest resources and money, and then set goals that the company can actually achieve. Meeting smaller goals helps improve financial performance in the short-term, while ultimately meeting your long-term financial goals.
Get everyone on board. Make sure your entire team is onboard with the budget. This ensures they abide by how much to spend and when to cut their losses. It also ensures that your team is engaged and committed to your company’s goals and bottom line. Satisfied employees can boost your financial goals since they are more likely to do what it takes to help your company succeed and stick around for the long-term.
Make sure your systems are current. Your company is only as efficient as the people and technology you employ. Outdated technology and systems can slow things down so much that you waste both money and time. Periodically check in with your staff to make sure they are making effective use of their time and efficiently processing anything related to your company’s finances, such as invoices and collecting overdue payments. Keeping the computers and software up to date will also keep things operating more smoothly. Utilizing financial performance apps and newer computer programs is key in today's fast-changing world.
Take time to review your company’s financial statements to see where you can make changes to improve its financial performance. You may be pleasantly surprised by the results.
NOW YOU KNOW😊
