Numbers don’t lie, but…

Grey base with numbers laid on top in a lighter colour. In the foreground the numbers are clear - in the background they are blurred and there is an orange glow.

They don’t always tell the whole truth.

If I told you that you had £300,000 in your pension right now, is that good or bad?

The answer is, of course, “it depends.”

The number by itself means very little. To judge whether you’re doing well, you need a lot more context. For example:

>> Are you better or worse off than you were two years ago?

>> Is this close to your final goal for your pension – or are you still hundreds of thousands away?

>> Do you have a realistic plan to bridge the gap?

In short, knowing what’s in your pension today is meaningless, unless you also understand what was in it yesterday – and where you’re likely to be in future.  Numbers don’t lie, but they also don’t always tell you the whole truth without that additional information.

That’s true for almost any financial measure.

Take, for example, the all-important question: “How well is my business doing financially?”

Too often, businesses only look at one point of that past-present-future triangle.

Sometimes you only look to the past – for example to last year’s accounts – because you don’t have much current financial information. By the time you look at it, it’s already out-of-date, which isn’t terribly helpful.

Other times you’re looking mainly at current information, like how many sales you made this month, how much money you have in the bank or how much stock you have. That’s great, but again, you need to understand trends over time to see whether these numbers are “good” or “bad”.

For example, £50,000 in sales this month may sound fantastic – especially compared to the £30,000 you made last month…

…Until you realise that you’re only due to make £25,000 in sales next month.

How often, though, do you look at forecasts for your financial future? And even if you do look at them, are they based on real data and are they realistic – or are they just guesswork?

That’s often one of the biggest gaps for business owners. Even if you can see what’s going on in your business right now and can compare it to previous months and years, you may have very poor forecasts for the future (if you have them at all).

It’s like knowing how much money’s in your pension today, without any idea of when and whether you’ll eventually be able to retire.

That’s the gap that we fill with monthly management accounts.

In my email last week, I explained that this monthly management pack is designed to answer the biggest financial questions in your business, so you can make better decisions. To a large extent, the information you receive is completely bespoke.

But there are also several common reports in every set of monthly management accounts we produce for our clients, and these are designed to give you a well-rounded view of your general financial situation – past, present and future.

For example, the profit / loss account will show how well you did in the past.

Your balance sheet will show what’s happening right now, at this very moment. So will cash-in-the-bank.

Finally, we will work with you to develop forecasts that will show you what you can expect to happen in the future, and build these into your monthly pack.

All this will allow you to see trends that would not be apparent if you were only looking at one or two of the points of the triangle. You might notice that your stock has doubled since last January, or that customers owe you a lot more money than they did this time last year – and ask why? Or perhaps you’ll be able to see that while sales are up this month, you’re going to run into cashflow troubles by March, and take early action.

We don’t leave you to draw conclusions alone. We always discuss the monthly management accounts with our clients; for many who are working with us for the first time, this is the first time they understand their true financial position in-depth.

Then, we discuss the practical implications, so you can quickly fix any issues that arise and take advantages of opportunities we identity. This really helps you grow faster and become more profitable – which is our ultimate goal!

If you, too, could use this kind of financial clarity and game-plan, please get in touch with me today. Simply email me or call us on 01279 647 447 to arrange a no-obligation chat about your needs.

We’re looking forward to helping you.



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In this blog archive our Managing Director, Garry Mumford simplifies all things financial and shares with us a lifetime of practical financial business advice.


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