Interview with Make Mine a Million $ Awardee on Financial Statements
Interview with Make Mine a Million $ Awardee on Financial Statements
Maureen Borzacchiello, Creative Display Solutions, Inc., (www.creativedisplaysolutions.com) is the owner of a premier resource for all of your trade show display and exhibit design needs. The company specializes in exhibits, events and graphic solutions.
Maureen is a Make Mine a Million $ Business Awardee.
In this interview, Maureen talks about how once she took charge of her financial reports, she was able to get a better handle on her decision making and productivity.
Q: What prompted you to take a closer look at the financial statements of your business?
Two years ago, I was probably the perfect picture of the typical small business owner. When you start out, you tend to be more of a visionary; you’re the rainmaker for the business, bringing in sales and making it happen. But eventually you can get bogged down in the everyday process of running the business.
At that time, our accountants would conduct quarterly reviews and file reports. We would use the review to keep a finger on the pulse of what was happening. Those reviews were based on the data I had put into Quickbooks. I would hand them the data, but I didn’t generate any reports myself.
Then several things happened at once. We had some family situations arise that coincided with some major changes in our business. We had just signed a lease to move into a real building, and had committed thousands of dollars to build out the structure.
We started the build out, we moved on, we were juggling contractors and trying to do some of the spare work ourselves. We paid cash, which we later realized we shouldn’t have done. At the same time, we were hiring more employees in different capacities within a short period of time as the business grew.
I wasn’t trained, or even aware of the value of running reports to look at real-time statements. So we hit a brick wall; one day we were out of cash. It was a shock, because we were doing well, the business was okay. But we didn’t see the cash flow crunch coming. And suddenly, we couldn’t make payroll and cover our expenses.
Q: This can happen to any business. So what did you do next?
Well, it was a humbling experience, but we managed to explain things to our employees and work things out. We knew we had open receivables and we knew we had to get some sales fast. So, we did. We cleared the decks, got sales up, and turned the situation around.
And simultaneously to that, I made my accountants come in and teach me how to generate reports, tell me which ones I needed, and why. I learned I needed to look at both accrual basis and cash basis reports. And I learned that I needed to be monitoring things much more frequently. A quarterly review isn’t often enough. Ostensibly, it means three months; but realistically, by the time you get a report from your accountant, it’s four months. And that’s too much time; you can miss some important shifts in what’s happening inside your business.
Q: And how would you characterize your personal involvement with financial statements now?
Now, I can generate my own reports on a weekly basis. I know how to do it myself, even though I have someone to run the reports every Friday. I check open receivables and cash flow.
We can tell, for example, if we haven’t hit our sales goal this or last month, and we know our bills are due, then we’ll need to try to collect some open money. Or tap into a line of credit to float us until a client can pay us.
And now that I’m able run the basic reports, I can use the data to do deeper analysis. For example, this year, I actually looked at my chart of accounts, and looked at services versus product sales. I realized that in order to differentiate these lines, I needed to adjust to way the chart of accounts was set up in order to see that picture. I talked with my accountants and they said we could do that, no problem. So, now my P&L is even more useful, we now can see, for example, that we make a much lower margin on services, because it’s got to be at what market will bear. This knowledge helps me make better income projections than I was able to do before.
Looking ahead, I would like to dig even deeper to look at trends, break things out; maybe look at historical data to see where our business is going. Now that I can get in and out of my reports, I have both more confidence and more of an inclination to go further.
Q: What would you say to women business owners who may be avoiding taking a close look at their financial picture?
When you don’t review your financial data, you don’t really have a sense of what’s taking place in the business; you’re essentially blind-folded. For example, if you don’t have a true understanding of your costs, you can’t know whether you are charging the correct price to your clients. If you don’t segment your product lines, you can’t properly analyze your business.
It’s difficult to be proactive and plan ahead. Not knowing also creates high anxiety, because you’re walking around with this feeling that you’re not really on top of things. You have this vague sense that you are wasting money, but you can’t pinpoint the problem.
The energy drain of not knowing is enormous. Right now, we’re setting up a new building. And the new utility costs are turning out to be much higher than we projected. So, this weekend I sat down to look at the numbers and determine the new monthly “nut” or total costs that need to be covered. Just knowing what I was dealing with helped me relax.
That knowledge gives me confidence, and it definitely helps me sleep better at night! I used to be so drained by thinking about financial matters. Now, I look forward to the weekly review, because I know that the information is going to help me get a handle on where my business is and where it’s going. That’s empowering.
So, I would say to other business owners that knowing the reality you’re in is a good thing, even if you don’t like it. The truth is peaceful even if the truth is not pretty.
And the best part is: once you’re willing to invest the time and effort, you can definitely see an improvement in both your business operations and in your own peace of mind.
