Managing By The Numbers: A Commonsense Guide To Understanding And Using Your Company's Financials

by Chuck Kremer

But the Financial Scoreboard has several big advantages over the traditional presentation. • It lets you see the big picture of your company’s financials at a glance. It’s like an executive summary. • It shows cause-and-effect relationships. You can understand exactly how and why your balance sheet at the end of a year (or a month) differs from the balance sheet of the preceding period. You can see why receivables went up or down, why inventory has increased or decreased, and where the change on the cash line came from. The Scoreboard thus makes it easy to track progress against goals. • It helps you fill in gaps. If you don’t get a direct cash-flow statement from your accountant, for example, you can create one using the Scoreboard. • It’s a powerful planning tool, as we’ll see in Chapter 12. You can plug in projected figures for the coming period of time, then watch what happens to some of the other items on the Scoreboard. • It’s helpful in detecting error, incompetence, and even fraud. If things don’t add up, you know there are mistakes in the traditional financials.