Throw them away, or at least don’t look at them. Put them away for now. During a pandemic you don’t need a consultant or fancy forecast model to tell you cash is king. You need to know exactly how much you have, where more is coming from and where it should go. If nothing is coming in, nothing goes out. Restarting is expensive. But beyond the pandemic your financial statements are at best inadequate. Most people manage a Profit & Loss statement, but that is the result of changes in your balance sheet. Even if you manage your balance sheet there is a lot that isn’t included.
There’s probably an asset line for your trucks and it might even tell you how many you have. But does it tell you how many miles your delivery fleet went? And how many miles they could have gone? How many packages did you ship, how many meals did you serve and how many people came into your store. All of these things are how you actually manage a business.
It is said the balance sheet first appeared in the Middle Ages and the P&L a few years after that and the cash flow didn’t become widespread until the 1980’s (which is why I guess everybody ignores it). Back then creation of the financial statement was the value add. Back then it was a herculean task presumably undertaken by many people to distill a business down to a single sheet (or tablet as the case was then). Today financial statements are produced quickly by a machine with virtually no value add. And while they were great in Middle Ages, they haven’t changed to much since then. They are a historical (read “old”) view at a very high-level. How one is supposed to manage a business today by something that is outdated upon printing is beyond me. What’s more amazing is many software programs don’t tell you a ton more. Certainly there are drill downs and individual accounts can be looked at, but where is all the action?
To be clear, I am not advocating for a labyrinth of spreadsheets which is shockingly easy to build, equally as easy to lose control of and very common in many small businesses. Excel is a great tool, but it is for analysis not data storage. If you’re copying and pasting data into Excel you are making a common mistake. Data is the lifeblood of a company and if managed correctly is where competitive advantage comes from. The less gray area there is the closer to the line you can get and maintain profitability.
I had a conversation with a small dedicated contract trucking company about data. Oh the sources that could be brought together – weather, traffic, ELD (truck information), oh and then financial. Imagine the power – this route on Monday’s when it’s raining takes more time, maybe use a more efficient truck and save three percent. This truck’s efficiency is declining and after repairs we typically see an increase so now is the time.
So do you buy an off the shelf “business intelligence” package? If that’s works for your skill set the prices have come way down. Me personally, I prefer to get in there myself and build the dataset myself and plop Excel on top to do what it does best. If you go that route, you’ll be even more prepared to ask the right questions if you switch to a BI package. Regardless, the information you’re looking for is not in your financial statements.