It is easy to get in the habit of doing things the same old way, year after year.  An outsider, though, can come in and within minutes see things that we can be missing.

One of these areas is the income statement.  The balance sheet and cash flow statements are pretty straightforward.  There is not as much detail and the reporting is pretty standard. 

The income statement is another matter.  Sure, there are certain practices everyone needs to follow.  However, depending upon the industry and personal preferences, the look of the income statement can vary tremendously.

In addition, the standard layouts for income statements can leave something to be desired.  In some programs, they have gotten so much easier to use over the years that they leave a lot of room for customizing the layout.

Most of the time, I find that the income statement presentation leaves a lot to be desired.  I often hear the same feeling from company presidents when I asked them as well.

This is where the outsider view comes in.  When I look at an income statement, I can tell within a few minutes what needs to be changed.  Things just leap right out as missing.

I was at a company the other day and had a first look at their income statement.  In just a few minutes, I saw that:

·         Product line profitability was not clear.

·         Manufacturing variances were lumped together into one account rather than being split between materials, labor and overhead.

·         Manufacturing overhead items were down in administrative expense, so the company did not really know what their gross margin was.

·         Administrative costs were lumped together in one huge account, rather than splitting out into key areas like R&D, Sales and Marketing, Personnel and Other Administrative.

Have an outsider look at your income statement.  In just a matter of minutes, you could get a handful of action items that will lead to your getting a much better perspective on how your company is doing.