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Posted on 3/25/2015

​Understanding Financial Statements – Don’t Leave It To The Experts!

Maryann Daddow

One of the first pieces of advice that I offer to new business owners is to get a basic understanding of finances. Most times, it’s not high on the priority list, but the time invested in building a knowledge base will not only help in meetings with potential investors and bankers, but can actually help you manage your business more effectively.

It is important to have a professional accountant or CPA maintain your books and prepare your taxes. But, it doesn’t end there. Some working knowledge of financial statements can really pay dividends, so to speak.    

Meetings with financial advisors and investors can be intimidating. You may even feel that they are speaking a different language. They are! Gaining even a basic understanding of financial statements can help you be conversant with your financial advisors. Likewise, don’t just leave your finances in your accountant’s hands. Learn what the numbers are saying. Asking meaningful questions of your accountant or CPA will help assure the reliability of your statements and can also help you to improve your company’s financial performance. 

Some questions to ask:
•    How are expenses trending and when are they recorded?  
•    Why is my revenue not the same as my cash taken in?  
•    What is depreciation and amortization?  

You built your business model to deliver a stream of positive cash flows. But, having a strong balance sheet and income statement are also necessary as a business matures. For example, did you know that you could have positive cash flow but be reporting a net loss on your income statements?
  
An accounting or financial analysis course from a community college or professional organization (for example, the Michigan Association of CPAs) may be all you need to raise your comfort level. Just like learning a new language (or exercise), the hardest part is sometimes just getting started.  

About the Author

Maryann Daddow | Automation Alley

Maryann Daddow is Automation Alley’s director of finance. In this role, Maryann is responsible for accounting and financial management for Automation Alley, as well as the lead interface with outside auditors. Daddow has more than 25 years of experience in finance and accounting, previously working in the automotive industry with Chrysler Group LLC. Her work experience has encompassed technical accounting, financial analysis and controllership responsibilities across a wide range of functions.

 
 

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