The Corner Office

Making your financials work better in your managing process

Pick Three?


Recently, I was working with a GM of one of the companies I own, and we were conducting a routine review of our results against our first-quarter plan. I've been doing these types of reviews for years, and I know that there's often a lot of dead weight in these financial reports.

For instance, why was I including a $100 expense budget on a jam-packed page? Both my time and my GM's is valuable, and it's not as if the $100 was a material item worthy of our undivided attention. So before the meeting, I decided to save us both some time, and on this 47-line sheet, I highlighted the items that would actually matter to my GM, leaving about half of the page out of the discussion.

And yet, during our review, I still found myself saying a lot of “Well, ignore that, you can’t help that,” and “Don’t worry about this one, it has nothing to do with you.” When I took a closer look at my highlights, I realized that all of them mattered, but maybe half of them had anything to do with areas that the GM could affect with his work.

For example, our liability insurance is a considerable expense. But our GM has no control over that; it’s negotiated with an insurance company every couple of years. The same is true for our health insurance and a lot of other provided services that make a significant impact on our margin but exist solidly outside the purview of a GM.

If you’re a small enterprise, I'd be willing to bet that you've also run into this issue. And the solution to it starts with isolating the things that are high-impact, material items for you.

I've worked on financial statements for hundreds of companies, and this is an issue I see all the time. Why do I have this entry? Is this material? Does it matter? Long ago, I decided to reorganize financial statements by operating units, where I grouped them by a hierarchy, from most important to least important.

That meant putting the big-impact items at the top — things like staffing expenses, overtime, benefits and items within your control to impact and manage. Items toward the bottom of the financial statement should be telephone charges or office supplies. Yes, these items matter and affect the bottom line, but how much time are you willing to personally invest in managing your post-it inventory?

But clearly, I keep forgetting the lesson. So what actions do I take from here?

Well, I’m going to start with stripping down our financial statements. Instead of printing out a 47-line sheet to review with my GM, I’m going to export a new routine update with three items that he has the most control over on the revenue side and four items that he has the most control over on the expense side.

Everything else is going to get lumped into “other stuff.” That doesn’t mean that those items will be ignored — that’s just asking for an item to sneak up on you. I’ll still keep the complete, detailed report. But unless there’s something specific that we need to discuss or my GM has a question, including those extraneous items should not be the expectation going into our review meetings.

Going back to our specific example of increasing insurance rates, those can still impact the meeting I have with my GM, even if he can't change those numbers.

Because I’d reviewed the complete financial statement before our meeting, I knew going into it that interest rates would go up. My GM can't move the dial on that, but since that has a real impact on cash flow, I can direct him to work on the areas under his control to compensate for this change.

That’s the take-home message here: Review everything, but don’t give people more information than is helpful to performing their jobs. And hey, maybe I’ll be writing here in six months about how we lost control of X item, or Y amount of revenue stopped coming in because we weren’t focused on it.

But I doubt it. More likely, things should run smoother for the operators with clear, direct information on what they need to focus on. And in the meantime, I’ll still be looking at the big picture and accounting for the high-budget items that don’t move much, then filtering relevant information to the people who need to know. That means shorter meetings and clearer expectations, and from where I’m standing, that can only be a step in the right direction.

Doug Phares is the former CEO of the Sandusky News Group. He currently serves as managing director of Silverwind Enterprises, which owns and provides management services to small businesses. He can be reached at


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