Axiom CPA, P.A. - Axiom CPA Blog

The first thing we do when researching a new client is find out how often they review financial information. Many are accustomed to sitting down with financial statements quarterly. About the same number only look at financials annually (with their tax return). A very small group review monthly numbers. A fraction of a fraction review summarized financials and key performance indicators weekly. I believe weekly reviews are important for a few reasons.

First, employees don't operate on a monthly schedule, they operate on a weekly one. When was the last time you woke up and said, "Thank goodness it's the 30th!"? It doesn't happen. But every week without fail your mood changes based on how close (or far away) you are from the weekend. You plan your community events on a weekly basis (2nd Tuesday, 3rd Wednesday, etc), your social calendar is on a weekly rotation, you go to church weekly, you mow the grass weekly...but you work monthly. It doesn't make any sense. Our world is wired in a weekly format.

Second, customers operate on a weekly schedule. If you don't believe me look at any retail business. Their busiest days are typically on weekends. When customers spot five weekends in a month they don't think to themselves "Wow, we better reduce our spending by 25% for the first four weekends so we can spend the same amount as usual on the fifth weekend." That's ridiculous.

Third, speed is critical. A business that reviews it's numbers weekly has four times as many opportunities to make corrections and head off bad decisions as a business that only reviews it's numbers monthly. When we push owners to adopt a weekly reporting schedule they usually tell us they can't get good information that fast. The truth is you don't need perfect information. A business that waits for 100% of the information on a monthly basis is ALWAYS going to be beaten by the business that uses 80% of the available information to make decisions four times as quickly. We can put processes and procedures in place to automate much of the weekly closing work by using estimates and other shortcuts. These numbers get "trued up" at month end but in the mean time owners have vital feedback on sales, product costs, overhead and leading indicators that put them light years ahead of their competitors.

Finally, weekly reviews FORCE owners to think strategically, and they get everyone in the HABIT of thinking about the business as a whole. Most business owners spend the day putting out fires and jumping from one crisis to the next. Once you've been through a quarter where you have reviewed financial statements 13 times in three months you'll never go back to monthly reviews. You won't be able to. You and the people around you will crave the information and feedback that comes from weekly analysis. It's a different way to manage your business, but there are some ground rules.

Make it simple. Weekly financials should be summarized, one-page documents.

Delegate it. Owners should not prepare the financials. Otherwise you are only one crisis away from missing your weekly review. Put it in a capable employee's hands and hold them accountable to the weekly schedule.

Involve the team. An owner sitting alone once a week looking at financial statements is only a little more useful than one looking at monthly statements. A whole team going over numbers once a week is a recipe for success.

Look forward. The analysis should include a handful of non-financial measures that can be used to predict next week's activity. Order backlog, next week's numbers from last year, marketing campaigns in play, proposals in the field...all of these can be used as predictors.

If you need help getting started on this path just ask. Your CPA should be able to craft a simplified reporting statement and configure your accounting software to produce much of what you need at the push of a button. Identifying KPI's is a little more involved but a little financial analysis will often go a long way in determining which non-financial numbers you should be paying attention to.