Quarterly reviews

We are in the middle of quarterly projects right now which includes the filing of payroll taxes and the review of financials. 

We prepare actual reports for some of our clients which include analysis and suggestions.  Others need a less formal process, but we like to sit down with all our clients to talk about their financial statements.

If the client has a budget, we compare the actual results with the budget.  We ask questions about any variances in the results. If there isn't a budget, we just compare the current quarter to the previous quarter and the same quarter in the previous year. 

We look at the various ratios on the balance sheet (current, quick, A/R aging, inventory turnover, debt/worth) and the income statement (gross margin, net margin, sales growth).

Looking at the aging of receivables should be done regularly and past due accounts followed up on promptly.  The longer an account is overdue, the less likely the business is to collect.  Inventory should be monitored closely as well, especially if it is perishable.  Even non-perishable goods need to be watched as money is tied up in inventory and therefore can't be used to pay other bills.

Margins need to be looked at for various reasons.  Reduced prices during a sale need to be viewed from an overall standpoint to see if the results were a success.  Increases in the cost of raw materials need to be monitored to see if increases sales prices are warranted.  The same is true for increases in employee expenses-is your staffing level appropriate for your level of sales?

Business owners should be looking at their financial statements on a regular basis and asking these questions themselves, but talking them through quarterly with an accountant or financial advisor is often very helpful.