A Blood Test is Like a Financial Statement

Most people have blood taken when they go to the doctor for their annual physical. It’s part of the health checkup.

The results come back, and the doctor should review them with you.

If you only receive the test results and the normal ranges, that’s not enough. It doesn’t help you understand what’s happening with your health.

If something is too high or too low, your doctor should explain what it means and what you need to do to bring it back into range. Without that explanation, the test result doesn’t help you improve your health.

The same is true for your financial statements.

Your Financial Statements Are Your Business Blood Tests

First, you need an accurate, on-time balance sheet and profit and loss statement every month.

That’s like getting the blood test at your physical.

Then you need to read them.

That’s like reviewing the blood test results.

Then you need to analyze them and take action based on what they’re telling you.

That’s the interpretation of the results. And that’s where the value is.

Your Bank Balance Doesn’t Tell the Whole Story

If you don’t receive financial statements, you’re operating in the dark. You don’t really know whether your company is profitable, healthy, or headed for trouble.

Your bank balance doesn’t tell you that.

A healthy-looking bank balance can hide unpaid bills, slow receivables, rising debt, shrinking margins, or profitability problems that haven’t caught up with you yet.

On the other hand, a lower bank balance doesn’t always mean the business is failing. It may reflect timing, inventory purchases, debt payments, payroll cycles, or growth investments.

That’s why you need the full picture.

Looking at the Bottom Line Isn’t Enough

If you receive financial statements, glance at the bottom line of the profit and loss statement, and then throw the reports in a drawer, you’re still missing most of the story.

The bottom line matters, but it doesn’t tell you enough by itself.

You also need to understand:

whether gross margin is changing
whether overhead is creeping up
whether cash flow is tightening
whether debt is increasing
whether accounts receivable are slowing down
whether the balance sheet is getting stronger or weaker

Those trends are the warning signs. They help you spot cash flow, profitability, and productivity issues before they become business crises.

Financial Statements Should Lead to Action

Like your blood tests, your financial statements tell you what’s happening inside the business.

They’re not meant to sit unread. They’re meant to help you make better decisions.

If something is out of range, you need to know why. Then you need to decide what action to take.

That may mean adjusting pricing, controlling expenses, improving collections, reducing debt, watching inventory, or changing how you manage labor and overhead.

The earlier you see the issue, the more choices you have.

Get Help If You Don’t Understand What the Numbers Mean

If you don’t understand your financial statements, get help.

Ask your CPA. Read a book. My book, The Courage to be Profitable, explains financials in practical language for business owners.

You can also subscribe to Financially Fit Business, which helps turn profit and loss statements and balance sheets into clear visual insights, trend reports, and ratio analysis business owners and advisors can actually use. :contentReference[oaicite:0]{index=0}

Just like a blood test is critical to your physical health, your financial statements are critical to your business health.

Get them every month. Read them every month. Understand them every month. Then use them to make better decisions.

Spring/Summer NASBA sponsored group live courses (6 CPE):

Understanding Financial Statement Trends

Tuesday, May 19, 2026 – Duluth, GA
Tuesday, July 14, 2026 – Austin, TX (Texas approved for CPE)
Thursday, July 16, 2026 – Dallas, TX (Texas approved for CPE)
Wednesday, August 12, 2026 – Honolulu, HI (Hawaii approved for CPE)
Friday, August 14, 2026 – Kona, HI (Hawaii approved for CPE)

Click here to register

Want to see whether Financially Fit Business is a fit for you and your clients?

Click here to schedule a brief introductory call.

Subtle Changes in Financial Statements Mean a Lot – Part 8

Subtle changes in profit and loss and balance sheet trends mean a lot. It’s best to pay attention to these small changes and resolve them before they become major cash flow, productivity, or profitability problems.

In the last episodes, I covered small changes in overall profit and loss trends, changes in gross margin, and changes in productivity.

I also covered small changes in balance sheet ratios, including current ratio, acid test ratio, accounts receivable to accounts payable, debt to equity, and usage ratios.

In this episode, I cover the final balance sheet ratio: working capital.

Click below to listen: https://financiallyfitbusinesspodcast.podbean.com/