5 Key Questions to Understand Your Financials

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Financials…

Can you hear it? That’s the collective groan of almost every business owner at the mere mention of the word.

But all you business owners out there, you can save the exasperated sighs.

Because financials don’t have to be hard — you just have to learn to ask the right questions.

In fact, today’s guest, Kyle Beltle, Fractional CFO at Sweet Fish Media, says you can stop worrying about endless KPIs and just ask five simple questions.

In this episode, we discuss:

  • The 5 questions every business owner needs to answer to understand their financials
  • Why simplicity is your friend when it comes to financials
  • The value a fractional CFO brings to an organization (and why COOs should consider ceding some financial responsibilities to one)

The 5 Questions

While financials may not be everybody’s favorite topic, financial clarity is crucial in actually understanding and leading the financial aspect of your business.

So what are those five questions to ask yourself to help understand your financials and gain financial clarity? 

1. How Much Money Did We Make?
Okay, this seems obvious. But how often have you sat down in a meeting and realized halfway through that nobody is on the same page? Nobody understands the overarching goals that the team is trying to achieve? 

You want to know, for the prior month, what was your revenue? What was your gross profit? What was your net income? Start there. It’s the foundation of how you move forward with any other discussions. 

But keep in mind, money the business made and balance in the checking account are not the same thing. Every business ought to be on an accrual-based accounting method so that they have a true apples-to-apples picture of what revenue looks like. 

2. How Much Cash Will We Have in 12 Weeks? 

It’s all about forecasting.

Get out a simple spreadsheet, and look at the next 12 weeks. List out payments by customers, payroll, expenses, etc. and take a good hard look at what you’re projecting the next 12 weeks to look like. 

Don’t just log on, look at the account, and decide that because there’s more there than you thought there would be, that you’re good. That’s bank-balance accounting and it’s a form of knee-jerk reaction accounting at best, and a costly mistake at worst. 

3. What Are the Trends We’re Seeing? 

Now that you know your numbers, you’ve got to give those numbers context. Saying that you made $100,000 last month means nothing without it. 

Where were you three months ago? This month last year? Last month? Do you have a budget that you can compare your performance against? 


Once you have context around your performance, you can begin to dive deeper.

4. Who/What Are Your Most/Least Profitable Clients/Products? 

This is a hard question to ask, but it’s crucial. We’ve all been in citations where 20% of the customers are bringing in 80% of the profits. The flip side of that means that 80% of the customers are only bringing 20% of profits, but 80% of the work is going to only 20% of the return. 

Zero in on your star customers. What are their characteristics? Share these with your sales team so that they can try to bring on more customers like those. And if you have a customer who just isn’t profitable, maybe it’s time to let them go. 

5. What Is My Business Worth Today? 

So many owners and COOs spend all of their time in the weeds. It’s important to zoom out and look at the business from a bird’s eye view. To ask yourself, “What is the value of our business and has it grown in the last six, twelve, eighteen months?” 

You can have a professional valuation done, but those are usually expensive. For most people, some simple valuation metrics will be enough. 

Financial clarity isn’t always the sexiest topic, but it’s crucial to understand if you want to see your business grow and prosper. 

And, let’s be real — who doesn’t want that? 

Bill Reed

COO at Sweet Fish

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