I began my career as a CPA with one of the major accounting firms. It was fun for a while, but after a few years I decided the profession was not for me. That’s OK – different strokes for different folks and all that kind of stuff.
Anyhow, once I decided to move on to another career, I basically ignored all the ongoing requirements for maintaining my status as a practicing CPA. In response to my lapse in CPA-like diligence, the State Board of Accountancy contacted me. I received a somewhat terse letter with the following greeting: Dear Former CPA Certificate Holder.
I liked it. Direct and to-the-point communication. A brief lapse and you quickly get the word “former” attached to your professional designation. As the saying goes, “What they lacked in tact, they made up for in clarity.” It was actually a pleasure dealing with such straightforward people and they were just doing a good job of staying on top of things.
So, I surrendered my certificate and moved on with my professional life. However, here is one of the best things I learned during my CPA years. I learned that in order to make good use of financial statements you had to get better at extracting the story embedded in the numbers.
Numbers are just numbers and are fairly meaningless in the financial world unless you ask and answer the question, “What are these numbers telling me?”
As CPAs, we always began reviewing financials by conducting what we CPAs referred to as an analytical review. In a nutshell, that simply means you do some sort of comparison and questioning of the numbers.
For example, if you are looking at the expense side of a profit and loss statement and you see that Travel Expenses are $565,327 for the year, that doesn’t really tell you much on a stand-alone basis.
However, what if you ask, “How does this compare to the year before? How does this compare with the plan for this year? Are there significant variations? If so, why? How much is this as a percentage of revenues? What was the percentage the year before? What was the percentage in the best year ever and worst year ever? Does all this mean people are traveling too much? Or, are people not traveling enough? Are we having too many meetings that require people to travel? Are there viable alternatives to having face-to face meetings?”
I could go on and on, but hopefully you get the point. Numbers are just numbers until you work them over enough with questions and extract the story in the numbers.
The next time someone whips out a stack of spreadsheets or financial statements and begins droning on like Ferris Bueller’s economics teacher (see YouTube video “Anyone, anyone, Bueller”) ask them to STOP!
Then ask them to tell you the story embedded in the numbers. If they can’t do that, request that they come see you when they are prepared to tell you the story.
Chris Crouch is CEO of DME Training and Consulting and author of several books on improving productivity. Contact him through www.dmetraining.com.