Financial Management 101: Get a Grip on Your Business Numbers

by Angie Mohr

Overview

Get a Grip on Your Business Numbers Financial Management 101: Get a Grip on Your Business Numbers is the second book in the Numbers 101 for Small Business series. This book covers business planning, from understanding financial statements to budgeting for advertising. Angie Mohr's easy-to-understand approach to small-business planning and management ensures that the money coming in is always greater than the money going out! Analyze financial data to stay in touch with the heart of your business Measure your business success and pinpoint new opportunities Understand your business from the inside out "Even Microsoft and Ford started in someone’s basement or garage," says Angie Mohr. "But people all over the world have been given and idealized and unrealistic view of how to operate a business, and most discount the importance of the basics."

Product Details

ISBN-13:	9781770408807
Publisher:	Self-Counsel Press, Inc.
Publication date:	04/15/2012
Series:	101 for Small Business Series
Sold by:	Barnes & Noble
Format:	eBook
Pages:	184
Sales rank:	641,643
File size:	2 MB

About the Author

Angie Mohr CPA, CA, CMA is a chartered accountant and certified management accountant. She can be heard regularly on radio with Small Business Survival Tips. Mohr is also a business columnist for a large daily newspaper and has written many articles for business magazines. Mohr believes strongly in planning the entrepreneur’s business and personal life holistically. Her approach helps business owners to understand their business better and to run personally satisfying lives and immensely lucrative businesses. Angie is the author of these books from Self-Counsel Press: * Bookkeepers’ Boot Camp * Financial Management 101 * Finance&Grow Your New Business * Start&Run a Bookkeeping Business

Table of Contents

Introduction xv 1 Refresher: Balance Sheet, Income Statement, and Cash Flow Statement 1 The Balance Sheet 2 The Income Statement 4 The Cash Flow Statement 5 Chapter Summary 6 2 Basic Budgeting 7 The Monthly Budget Report 8 Where Do the Numbers Come From? 8 Revenues 10 Expenses 10 Chapter Summary 11 101 SMALL BUSINESS for Contents v 3 Variable versus Fixed Costs: Why You Need to Know the Difference 13 Fixed Versus Variable Expenses 14 Variable expenses 14 Fixed expenses 14 Why is Cost Behavior Important to My Business? 15 Break-even point 15 Capacity 16 Chapter Summary 17 4 Ratio Analysis for Fun and Profit 19 The Basic Ratios and What They Tell You 20 Solvency or liquidity ratios 20 Asset and debt management ratios 22 Profitability ratios 24 Which Ratios Should My Business Track? 26 When Good Ratios Go Bad: What to Do When There’s a Problem 26 Chapter Summary 27 5 Understanding the Operating Cycle 29 The Operating Cycle 30 The operating cycle timeline 32 The Cash Flow Report 32 Revenues 33 Expenses 34 Bringing it all together 34 Chapter Summary 36 6 Pricing Your Product or Service 37 Cost-Plus Pricing 38 Value Pricing 38 Competitive Pricing 39 Consumer Demand 39 Other Pricing Considerations 40 Pricing services 40 Penetration pricing 41 Pricing below your competition 41 vi Financial Management 101: Get a Grip on Your Business Numbers Contents vii Psychological pricing 41 Discount pricing 41 Chapter Summary 42 7 Key Performance Indicators: Your Keys to Success 43 How Do I Figure Out What My CSFs Are? 44 How can I measure my CSFs? 44 What Happens When My Key Performance Indicators Start to Slide? 46 Chapter Summary 46 8 Getting a Grip on Your Inventory 47 Types of Inventory 48 Retailers 48 Manufacturers 48 Service business 49 What’s Included in the Inventory Costs? 50 Inventory Management Techniques 51 Manual tracking 51 The ABC management system 52 Economic order quantity (EOQ) model 53 Chapter Summary 55 9 Accounts Receivable: The Money Coming In 57 The Sales Cycle Revisited 58 Setting Up Your Credit Policy 58 Terms of sale 59 Credit decisions 60 Collection policies 61 Factoring Receivables 62 Should I Hire a Collection Agency? 63 Monitoring Your Receivables 64 Chapter Summary 65 10 Accounts Payable: The Money Going Out 67 Supplier Financing 67 Tracking Due Dates 69 What Happens If I Fall Behind? 69 Chapter Summary 70 11 Buying New Things: Are They Going to Pay for Themselves? 71 Projected Benefits 72 Discounted Cash Flows 73 Payback 76 Benchmarking 77 The Scarcity of Resources (or “There’s Only So Much Cash”) 77 Chapter Summary 78 12 What’s Not Showing on Your Financial Statements 79 The Six Big Risks 80 Operating lease obligations 80 Lack of adequate insurance 80 Personal guarantees 81 Economic dependence 82 Foreign exchange exposure 82 Interest rate exposure 83 Risk Management for Entrepreneurs 84 Chapter Summary 84 13 Investor and Manager: The Split Personality of the Small Business Owner 87 The Small Business Manager 88 The Small Business Investor 89 Chapter Summary 91 14 Growing Your Business 93 The Three Methods of Business Growth 94 Leverage 95 Attract New Customers 95 Sell Them More 97 Sell to Them More Often 97 Tracking Your Business Growth 97 Chapter Summary 98 15 Facing the Scary, Two-Headed Banker Monster 99 Lending Money 101 100 viii Financial Management 101: Get a Grip on Your Business Numbers Contents ix Getting to Know and Love Your Banker 101 The Lending Proposal 101 The Care and Feeding of Your Banker 102 Other Dance Partners 102 Your Credit Score 103 Chapter Summary 104 16 Managing Debt 105 Understanding Debt Service 106 Debt service ratio 107 Payback 108 How Do I Calculate My Cost of Borrowing? 108 Bank loans 108 Lines of credit 109 Credit Cards 109 Capital leases 110 Suppliers 110 The government 110 The Danger of Leverage 111 The Debt Diet Plan 112 Analyze 112 Project 113 Act 113 Chapter Summary 114 17 Compensating Employees 115 What Are Your Employees Worth to You? 116 Office Assistant 116 What Are Your Employees Worth to Someone Else? 117 Benefits 117 Sick Days 118 Performance-Based Compensation: Paying for Value 118 The Performance Evaluation Process 119 Keeping Tabs on Employee Performance 120 Chapter Summary 120 18 Pulling It All Together: The Planning Cycle 127 The Planning Cycle 128 Planning 129 Control 130 The flash report 130 The monthly management operating plan 130 Growth 131 Fine Tuning 131 Planning 132 Chapter Summary 132 Appendix 1 The Monthly Management Operating Plan 133 Appendix 2 Present Value of $1 145 Appendix 3 Resources for the Growing Business 147 Glossary 151 Samples 1 Typical Balance Sheet 3 2 Income Statement 4 3 Cash Flow Statement 5 4 Monthly Budget Report 9 5 Cash Flow Projection 35 6 Inventory Tracking Sheet 52 7 Aged Accounts Receivables Report 64 8 Quarterly Performance Review 121 Diagrams 1 The Operating Cycle 31 2 ABC Tracking Method 53 3 EOQ Model of Inventory Management 54 Tables 1 A Quick Reference to Ratios 28 Worksheets 1 Business Risk Profile 85