Reading Financial Statements

In this tip, I wanted to share with you about reading financial statements. So when we pick up a book, there's words, we read it, you know, chapter 1 to the end of the book, it makes sense. But you've probably heard accountants say, hey, you need to read your financial statements. What does that mean? Yeah, there's words on it, but there's also numbers. It's typically The name, like the names of your category, the name of expenses, the names of your assets, and then a number. So what do we mean by reading it? What we're talking about is really analyzing your financial statements, because they do tell a story. They tell the story of the health of your business. They tell you where your business was and where your business is going. So a couple ways we like to read our financial statements, The obvious way is you just pull up your statements, your profit and loss statement, your balance sheet. You look at those and you look at them. You see, what is my income number? What are my expenses? A lot of softwares give you the ability to determine the percentage of income that each category is. So that's a fun Way to do that. You just click the button that says, you know, percentage of income, and now on your report maybe it says office supplies $3,000, that represents 1% of the income. That's really good because then sometimes the percentages give you a different perspective and you can see which expenses are likely overinflated, ones that you need to consider cutting back on. Another way we like to read our financial statements is comparing the current period to a previous period. Maybe I want to compare what is my August income and expenses, my profit and loss statement basically, what does that look like compared to my July expenses? Or how does this year's August compare to last year's August? August. Another way to read them is by looking at your financials with each column representing a different period of time. Maybe I want to look at it by month. So now I have each column represents a month: January, February, March, April, blah blah blah. I have my numbers down, and I can see a trend or possible trends. With each different account. Is my income increasing? Is my income decreasing? Those types of things. So when we say read your financial statements, really we're talking about analyzing them, um, because it's in that effort where you start seeing some things that maybe give you action items that you can take to make your gym healthier. So if I notice that my Uh, team member expense account is above 44%, and not only is it above 44%, it seems to be increasing as a percentage of my income. Now I get to ask myself some questions. Is this happening because my income is decreasing? Is it happening because my coach's expense is increasing? Are they coaching more hours for less income? Maybe something's going on screwy in the system. We just had a client contact us last week. Their payroll software had a coding error and it was causing them to overpay their team members by anywhere from 10 to 20% per pay period, and they hadn't caught it. So they had to— I mean, we're talking a couple years of stuff that brought them to us to— for us to help them out, where they're— I mean, we're talking tens of thousands of dollars in unnecessary payroll taxes because they weren't taking the time to read their financials. They would have definitely saw that the percent— their percentage of team member expense was not what it should be, and so they could have looked into it. So that's an example— reading your financial statements. If you like this tip, feel free to subscribe to our YouTube channel. Okay, we'll talk to you later.