We want to share Qokoon’s simple financial analysis method with business owners, CEOs and CFOs to help you better understand your finances and take appropriate actions to grow and protect your company.  

Are you on top of your finances?

• What were your profits last month and year to date?
• What is your profit margin?
• What is your operating cash burn?  
• Are your profits and profit margins increasing or decreasing? Why?  

Many entrepreneurs, CEOs and even finance directors don’t know the answer to the above simple questions. This is dangerous.

Understanding what has happened and why in the past will give you the knowledge to better prepare for the future.

The need to understand

When it comes to the performance of your company you should know what has happened and why. Do you? If you don’t, you are driving blind and heading for a crash.

Understanding your finances is not difficult. You just need some basic knowledge and a structured approach.

Once you understand what has happened and why, you can take the right actions to grow your business and protect your company. 

Essentially, you want your company to (i) grow, (ii) be profitable, (iii) be resilient and (iii) generate cash.

Our approach can help you achieve these goals.

Qokoon’s financial analysis method

Your financial information is summarized in three accounts (P&L, BS and CF). When trying to understand your company’s performance and status you should focus on three main areas, which are linked to your company accounts: 

• Growth and Profitability (P&L)

• Strength and Resilience (BS)
• Liquidity and Cash Generation (CF)

We believe that Key Performance Indicators (“KPIs”) are valuable. However we see many companies monitoring too many KPIs which may be confusing and may result in (i) lack of focus on what really matters, (ii) inability to understand your performance and strength and (iii) failure to make the right decisions (or even worst, make decisions that will damage your company).  

To avoid the potential issues with the management-by-KPIs method, Qokoon’s approach focuses on two simple questions about a small number of financial parameters:

• Question 1 – What has happened? (e.g. my profits have declined by 25%) 
• Question 2 – Why has it happened? (e.g. why did my profits declined by 25%)

Once you have understood what has happened and why, you can decide on an action plan. 

The table below shows an example of Qokoon’s approach for two financial parameters.

Getting the answers to the “what and why” questions above will allow you to:

• Focus on what matters;
• Understand what has happened and why; and
• Take appropriate decisions and actions to improve your company’s performance, strength and liquidity 

In the table below we summarize the brief list of financial parameters we like to monitor:

You can add your own parameters to the table above but make sure you don’t add too many to avoid being overwhelmed and confused. Usually, the answers about a few well selected parameters will point to other parameters/metrics as the explanation of what has happened.

Once you properly understand your financial performance and status you will not only increase your chances of higher growth and profitability but also avoid nasty surprises

Discipline about asking these two questions every month is the key to proper understanding and improved financial management.  

Here at Qokoon, we’ve built a simple software that helps you understand your business finances and communicate them to whoever needs to know in minutes. If you’d like to learn more about Qokoon, or try us on a 30-day free trial, click here.