Fiancial Statements That Make Sense
The measurement of contract revenue streams present some interesting challenges, both in the ways that they can be recorded on the financial statements and in the ways that they can be used to report wins and losses. In this article I will look only at how they can be more meaningfully presented on the financial statements. | | | |
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The Gross margin is probably the most important in any business, and yet many people fail to measure it. Part of the reason for this is that the Gross margin is radically different for different businesses and in many cases it is not a well understood concept. | | | |
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The most important starting point for most businesses to track each month is revenues, but what figure should businesses look at? The clear and logical answer is that you should track monthly billings and yet I have seen a number of businesses that track collections instead. | | | |
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Financial statements can be very misleading when you are comparing months that contain different numbers of working days. The traditional approach presents numbers exactly as they appear from the financial records; producing meaningful financial statements calls for an entirely different way of presenting the information. | | | |
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One of the most important things to measure is cash generated from operations each month, and I like to do this in two stages. The first stage is to turn the P&L into Cash Generated from Operations. The second step is to produce a statement that I call Quick Cash Flow – an approach which links the Profit and Loss and the Balance Sheet in a very effective fashion. Click here to complete your own analysis. | | | |
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