{"id":32453,"date":"2016-03-25T04:45:46","date_gmt":"2016-03-25T09:45:46","guid":{"rendered":"http:\/\/michaelhyatt.com\/?p=32453"},"modified":"2016-03-25T04:45:46","modified_gmt":"2016-03-25T09:45:46","slug":"financial-reports-every-leader-needs","status":"publish","type":"post","link":"https:\/\/fullfocus.co\/financial-reports-every-leader-needs\/","title":{"rendered":"The Big 5 Financial Reports Every Leader Needs"},"content":{"rendered":"

As leaders, we\u2019re often forced to pilot despite low visibility. But when it comes to finances, nothing is more dangerous than flying blind.<\/p>\n\n

I can\u2019t tell you how many accountants and bookkeepers I\u2019ve interviewed who thought quarterly statements were enough to run a business. That\u2019s nuts!<\/em><\/p>\n

Some of us know this from experience, but if leaders don\u2019t have current and correct information on revenue and expense targets, performance, and cash flows, it won\u2019t be long before they crash and burn.<\/p>\n

Flying Blind<\/h3>\n

In 1922 Jimmy Doolittle<\/a> became the first pilot to fly cross country in less than twenty-four hours. He planned to fly by the light of the moon, but bad storms kept him in total darkness for several very dangerous hours.<\/p>\n

There had to be a better way.<\/p>\n\n

Doolittle knew the right mix of instruments could give him the direction he needed in the dark. It took several years, but he figured out a combination of radio and gyroscopes could let him fly safely regardless of visibility. And he proved it in 1929 by flying a plane with a totally blacked-out cockpit<\/a>.<\/p>\n

When it comes to finances, leaders need the right mix of instruments too.<\/p>\n

The Big 5 Reports You Need<\/h3>\n

The good news is that we don\u2019t need a dashboard crammed with gauges and dials. It takes just five reports to get you off the ground and safely to your destination.<\/p>\n

    \n
  1. Annual and monthly budget.<\/strong> This is kind of like a preprogrammed flight plan. It\u2019s forward looking, projecting where you plan to go. If you don\u2019t have a decent budget, you might as well forget flying.<\/p>\n<\/li>\n
  2. Monthly profit and loss statement.<\/strong> Once you\u2019re off the ground, are you staying on course? A P&L statement tracks your performance against the budget.<\/p>\n<\/li>\n
  3. \n

    Weekly cash flow projection.<\/strong> P&Ls are lag measures<\/em>. A rolling sixteen-week cash flow projection gives you a vital lead measure<\/em>. You take your opening cash balance, add your projected receipts, and deduct your projected payments. It functions like radar telling you what\u2019s coming up, providing time for you to adjust course if necessary.<\/p>\n<\/li>\n

  4. \n

    P&L forecast.<\/strong> This is another important lead measure. A P&L forecast creates a forward-looking picture of your revenue and expenses. What\u2019s great is that you can play with different scenarios and see how they\u2019ll impact the year.<\/p>\n<\/li>\n

  5. \n

    Balance sheet.<\/strong> It\u2019s always good to know what your business is worth at any given moment, and there\u2019s no better one-glance tool for that than a balance sheet.<\/p>\n<\/li>\n<\/ol>\n

    Landing Safely<\/h3>\n

    These five reports work together like Doolittle\u2019s instruments. Of the five, I have found the cash flow projection the most essential for tactical decision making.<\/p>\n\t\t