Quickbooks (QB) and similar accounting programs allow even those with limited accounting training to track their business’s income and expenses. Preparing financial statements is as simple as clicking on the appropriate report option. Those reports are useful, but they can fall short of what investors prefer to see.

For the purposes of this blog post, I will focus on QB reports. The standard QB Income Statement report is fine but, unless one customizes it, it has the following drawbacks:

Pennies
Pennies are annoying anachronisms when received as change. They are even more annoying when they appear in financial statements. Customize your reports to eliminate pennies.

Thousands
Investor financial statements should be presented in thousands ($000). This change can be accomplished through the customization option also. Smaller businesses, those with sales of less than $1 million, can ignore this rule of thumb.

No EBIT (and EBITDA) Income Statement Presentation
Investors prefer income statements that break out EBITDA and EBIT. Both are used to analyze the performance of a company’s core operations without the costs of capital and tax expenses impacting profit. Acquirers often use multiples of EBIT to value acquisition candidates. Create a customized report or export your P&L to Excel and change it accordingly there.

Collapsed, not Expanded
Expanded financial statements can be very useful reports for management. Collapsed ones should be sent to investors.

I’ve written before about the need to track actual results versus budgeted ones, as well as the importance of tracking KPIs. I won’t repeat those comments here. I will, however, mention a common failing I see with long term financial projections. Specifically, how future years are presented.

Avoid using a Year 1, Year 2, Year 3 . . . presentation. The same applies to a Month 1, Month 2, or similar view. Such presentations only engender questions like: “When does Year 1 begin?” You will be forced to answer this question anyway, so take a stance and present projections with specific dates that represent your best estimates. Investors, banks and others prefer projections that match fiscal years which, most often, are calendar years.

One final comment. Always prepare a Statement of Cash Flows. Presenting just an Income Statement, or just a P&L and a Balance Sheet is not enough. Your financial projections should integrate all three statements.

If you have questions about approaching investors, or anything else, drop us a line. Worldwide Local Connect helps entrepreneurs and small business owners succeed. We can help you as well.

Share This