Pull up the latest income statement your bookkeeper or accountant sent you and count the line items on it.
Here’s a guide to how you’re seeing your business based on the results:
5 to 10 = flying at 50,000 feet
10 to 30 = flying at 30,000 feet
30 to 50 = flying at 20,000 feet
50 to 100 (or more) = walking around on the ground floor
When running a business, you start by flying around at a high level to see the big picture, take the plane lower to get a closer look, then land the plane to go fix specific problems you’ve discovered.
Monthly Financial Review (MFR)
Phase 2 of the financial operating system is all about reviewing the numbers at those different levels using an easy-to-execute process.
We call this the Monthly Financial Review (MFR). It’s the core financial analysis framework with 3 basic steps:
Prep — Gather the right reports, in the right format, with the right visuals.
Trends — Examine financial trends over time to understand the “story” behind the numbers.
Score — Build a ratio scorecard to assess the overall financial health of the business.
This process is incredibly simple and works for any business, in any industry, of any size (whether they’re seasonal or not, too).
And while we call it the “Monthly” Financial Review, the same process is repeated quarterly and annually with a little more depth.
We’ll tackle each piece of this review process, starting with preparation…
