Respect One Two Three

In Zambia, we are big on numbers. Whether its vote tallies in the last general election, to the amount we are currently paying for fuel to the general perception of how much money it will take to develop our country. But ever wonder why some numbers are often taken for granted when looking at the bigger picture when creating value? Why success is only measured on the top line whilst the middle park is ignored? But wait. Not everyone has the privilege of being enrolled at institutions that teach interpretation of financial numbers nor are many alumni of such. A problem no doubt but not a complete train smash.

We at TFHZPC address this argument to the startup entrepreneur. The one with the big idea who wants to take it to the next level. The blogs we have given you so far tell the story from 3 core financial statements: The Balance Sheet (What a company owns, owes and its value), The Cash flow statement (How you are spending your money) and Income statement (What cash is coming in and going out).

What a company owns, owes and its value

When you enter a market as a game, the new player must take stock of what he believes will generate revenue for his / her grand idea. We believe they call them assets!! These money spinners are what keeps your business in the game. However, there is a small matter of paying for the privilege of money spinning. The liabilities you owe: be it to the bank, loan shark, relative that gave you an endowment. Subtracting these aforementioned two gives you your worth. Do not cheat yourself: you are not worth that invoice you cashed in. Do the math and know the worth of your business.

How you are spending your money

So you have accessed some cash. That’s financing. The moment you decide to purchase a printing press for your company, that’s an investment. When you have to do your tamanga, those lunch meetings to score the deal, fuel for your jeep or printing of business paraphernalia, that’s operational costs.

What cash is coming in and going out

What many often pay attention to mostly is the money coming in and out of their company. Accounting for revenue and what it costs to make those sales gives you an indication of whether you making good of those items that are in the balance sheet. Our blog ubiquitously mentions EBITDA. This is where we calculate it! (Can we retire now? Not just yetJ)

When 3 become one

We believe when in doubt, look at the numbers. Very challenging times ahead. The macro forces have not yet settled.  However, we excited to see what premier companies will be up to in these 3 statements when final year results are announced in 2017. With strategy at the center, we believe the 3 financial statements have the capacity to show light to any business owner who pays attention to them. The sort of light that makes managers make decides to opt for just in time (JIT) when it comes to handling inventory. The sort of decisions that marketing managers make when they are looking at increasing their company’s product visibility without hurting the bottom-line. The sort of decisions that make corporate finance managers seek alternative forms of financing of the numerous projects a company may wish to undertake to continue generating value. The sort of decisions that human resource managers will make that will bring the most out of their employees boasting return on labour (kwacha generated per employee). The sort of decisions shareholders will make when they take management teams to task to forego dividends in the interest of growing their businesses and retaining competitive advantage. The trinity of financial statements have the power to change the course of any business. We are certain that companies that will report healthier earnings at the close of our current financial year would have looked at the nuances in the numbers and extracted value from their businesses.