Does your company analyze their financial statements through the lens of the 5 drivers? Cash, Profit, Assets, Growth, and People. If they aren’t, no offense, but they’re doing it wrong. It’s a concise way to analyze where the company is succeeding and what could use attention. It is also a way to help every employee understand what they can do to help the growth of the company.
If a receptionist of the company feels like they have no impact to the bottom line, it is easy to show them that they have a direct correlation to the people driver. They’re the first introduction to the company, and if it’s negative, the client may never return. This is exactly why business acumen is so important. It is getting every employee on the same page with the executives. Business acumen is helping every person feel like they play a role to the overall success of the company.
Here is a brief walk through to show you how to examine the financials of a company. This is an efficient way to help you see how each company analyzes and measures their success.
Statement of Cash Flows: Come to this document if you want to learn about your company’s cash. You’ll be able to see how a company generates its cash and where it puts it. This is essentially what you would see if you were looking at your best friends bank account. It's a record kept of all the money coming in and going out of a company.
Income Statement: (Also known as the P&L) This is the document you’ll be able to see how a company manages it’s profitability, its costs, revenues and sales. It shows the net sales of the company, what costs had to be spent in order to keep the company running, and then you get the final net income number.
Balance Sheet: You would analyze this document if you’re looking for the assets of the company, if you want to compare them to the liabilities, and to learn more about their equity. The balance sheet’s entire equation is Assets = Liabilities + Equity. So you get a break down of where the assets are coming from, and how the liabilities and equity contribute to the bottom line.
Did you know that the 3 financial statements are all actually just 1 large document? Where the Income Statement ends, is where the Statement of Cash Flows starts. Where the Statement of Cash Flow ends, is where the balance sheet starts. Essentially, the basis of each company lies within the financial statements. You are able to see exactly where the money is coming in and going out. Viewing it through the 5 driver model, you can see the direct impact each employee has on the overall health of the company.
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