When it comes to understanding your company’s finances, you might feel overwhelmed. There is so much information to consider, and gaining a working understanding of what each piece of information means can be a challenge.
LWG knows how stressful this can be – which is why we want to shed some light on what your company’s financial status really means for the future.
The first step is to understand what your financial report actually says. You might see the words “Current Ratio”, but you may not have a full understanding of what that means and how it affects your business (in this case, the Current Ratio refers to your company’s current assets divided by its current liabilities). We work with our clients to educate them on what these ratios mean for their business.
The next step is taking a closer look at each of the numbers individually. Are you noticing any trends in your Debt to Equity Ratio? Has your Gross Margin percentage risen or fallen by a significant amount? You will likely see some fluctuation in these numbers on a regular basis – what’s important is to realize what is causing the fluctuation, recognize whether it has been planned, and have steps in place to move your company back to the numbers you want to see.
Once you have a better understanding of each individual piece of the puzzle, we encourage you to take a moment to view the big picture. Paying attention to the overall pattern of your financial status will allow you to keep your finger on the pulse of your company and understand what changes, if any, need to be made. Look at different timeframes to see how your company has fared over the last month, year, five years, etc.
LWG places an emphasis on your Gross Margin Percentage, which is your yearly revenue minus the cost of your sales. If this number is going up or down, you need to know why. Adjustments might need to be made, and by keeping up with the current Gross Margin Percentage, you will be able to steer your business in the right direction.
We know you might have more questions – and we are ready to help. Contact us at info@www.lwgcpa.com or 1-877-634-4747 to learn how we can help you understand your company’s financial future.