When you deal with something almost everyday it can become second nature to you. So it is with financial statements for those of us who pour over them in business plans, financial forecasts, and case studies. But for many entrepreneurs, even some with surprisingly large companies, financial statements are difficult to digest and interpret.
My column in this week’s Tennessean offers some tips on how to begin to understand and better utilize the information contained on a monthly income statement.
It is important to look beyond the numbers presented in the income statement and examine the percentages that each of those numbers represents. Look at major expenses every month to see what percentage of sales is being used to pay for each expense. Entrepreneurs who train themselves in how to read their income statements carefully will begin to see trends that will help them make decisions and solve problems within their companies.