do you understand your financial statements?

As strange as it may seem, many readers of financial statements don’t actually understand how to read financial statements. After all, accountants tend to use language that doesn’t make sense to non-accountants. They also have a tendency to create complexity around the simplest of concepts. Most people generally zero in on a few key numbers (gross profit, net income, etc.) and ignore the rest. Unfortunately, by ignoring the rest they usually ignore the rest of the story.

Since you have wisely invested in creating a solid admin infrastructure that allows and promotes your company’s growth, your accounting department issues interim financial statements (probably monthly, hopefully quarterly). But do you know how to read them? And, more importantly, do readers of your financial statements understand what the numbers mean? Does your management team understand what these monthly reports reveal about the company’s performance?

What often distinguishes a good CFO from a great CFO is the ability to communicate in plain, easy-to-understand language. As a growing company, it’s critical that your financial team is able to develop the accounting role beyond numbers to numbers that talk to you. A huge part of their role is to shed light on what your financial statements are telling you.

Thankfully, we have created a template to help because we believe that there’s no sense in issuing financial reports if no one can understand them. Use our sample narrative in the Business Ready CFO Report Template to answer questions and to provide useful information. The template is designed to provide a meaningful financial report to accompany the numbers.

Your interim financial statements reveal key information about about your company’s past, present and future. If you don’t understand them, ask questions and make sure you get answers you can understand. You need to know what your statements are telling you!