Monday, January 31, 2005

Your monthly report card
with Bruce Burns
Q. How can I use my financial statements to maximize my 2005 profits?

A. Financial statements are the monthly report card for how your business is performing. If you use them properly, they will provide you with operating information to initiate changes to enhance profits and decrease costs.

The layout and timing of the financial statement is critical to maximize the impact it can have on your business. The general manager/owner needs to have their financial statements within 10 days of the month’s end. If your accountant cannot have them finalized by that time, have him send you a first pass, which is normally very close to the finalized statement. Many owners will produce their own monthly statements and have their CPA finalize them at year end, enabling them to produce them quickly and less expensively.

The most efficient layout for your financial statements is to produce a current month and year to date column for the current year and the previous year. Each line item should have percentages based on the net revenues, which enables you to evaluate how you are doing compared to your budget and last year.

It’s important to register all expenses and cost of goods in the month they are paid. All capital equipment should be depreciated on a monthly basis and be excluded from the cost of goods. If they are included in the cost of goods, you will have inaccurate earnings results and inconsistent comparisons to the previous year.

Revenues should be listed by rentals and sales since rentals do not have cost of goods and are depreciated based on various depreciation schedules. For sales, there should be separate line items with the cost of goods and gross profit listed with the same description. By doing this you can evaluate which products lines are more profitable.

An experienced HME consultant can assist a business owner on how to structure and utilize the financial statements as an important analysis tool.

Bruce Burns is president of Affinity Ventures in Albuquerque, N.M. Contact him at