Reviewing Your First Quarter Results

If you are operating a calendar year business, you have just completed your first quarter of 2010. This is a great time to see where you stand and to identify any opportunities for improvement.

Regardless of the accounting software you are using, you should be able to quickly access the following five pieces of important business information:

1. Financial statements
   • Income Statement - print a departmental income statement showing results by individual line of business. Compare year over year results within each department and then review your operating expenses as a percentage of total revenue.  Investigate any unanticipated increases in individual expenses.
   • Balance Sheet – compare the percentage growth in your Inventory and Accounts Receivable balance with the percentage growth in Cost of Goods Sold and Sales. If the assets are growing faster than the related item on the income statement, you might need to review your management policies.
   • Cash Flow Statement – review your cash flow report for insight into the difference between your net income and your cash balance. Pay particular attention to increases in asset balances over the prior year.
2. Projected cash requirements – generate a report or view a graphic that shows your projected future cash requirements. Ideally your accounting software will offset expected customer receipts against amounts due to your vendors to display your net cash requirements over time. If your expected receipts fall short of your anticipated disbursements, now is the time to line up working capital loans or a line of credit.
3. Profitability by item – if you are selling products, your inventory system should provide information on your most- and least-profitable items. Ideally you will also be able to review either inventory turns or average days on hand for each item that you sell. Examine both the slowest moving items and the least profitable ones and consider making adjustments to your sales mix.
4. Sales and marketing expense – review your sales and marketing expense to see if you can quantify the results of individual investments. Are you capturing your marketing expenses in sufficient detail to separate your public relations and branding efforts from your direct sales and promotional efforts? If not, you might consider adding additional account details to your chart of accounts so that you can stay on top of your expenditures.
5. Purchasing trends by vendor- review your purchases for the quarter to determine if you have sufficient volume with a single supplier to negotiate purchase discounts going forward.

Rather than waiting until the end of the year, now is the time to review your results, revise your plans, and make any necessary course corrections.  Please contact us if we can assist you in identifying or communicating team goals, creating compensation plans, configuring your accounting software, or revising your strategies for the coming year.