The Best Intuition Is Numerical Intuition
If you're like me, you remember a compliment for a long time. I'm still proud of one I received 15 years ago. An accountant doing the monthly books for one of my companies told me that I was the best objective accountant he knew. He was referring to my knowing the numbers on our profit and loss statement before seeing them–my numerical intuition.
Numbers are a road map, the primary way to determine whether or not you're on course. They're a way of knowing whether you are driving your company correctly, or whether you are too close to the ditch. Numbers are an achiever's second language, and one you must speak. Today's numbers become the basis for tomorrow's forecast. They represent what you expect to happen–your financial goals, your vision of the future.
Our staff accountant, Mike Peterson, plays a game with me every month. Before handing over the P&L, he asks me to estimate the month's profitability. I'm typically within five percent and often closer. An intuition for numbers separates goats from sheep. This important sixth sense allows the anticipation of important financial and other quantitative trends. Numerical intuition comes more naturally to some, but it's always a result of study, concentration, and experience.
To have a quality company you need quality numbers. Our staff has spent hours looking for a missing dime at monthly book closing–a discipline I highly recommend. When we publish our financial statements they are as correct as humanly possible. No abouts or almosts.
If your accounting statements aren't professional and accurate, they will lie. And when accounting lies, you are driving your business on a soft shoulder. Be sure your numbers are accurate. Get them quickly–within two weeks of month's end–and spend time with them. Learn your company's ratios and how one entry relates to another. It should become second nature.
Effective organizations have many common denominators. The emphasis put on the creation and understanding of correct financial numbers is crucial. Know your numbers. If you don't, your business is dead. Period.