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Bob Orenstein is a
CPA which gives him a strong background in finance, so, we can learn from him
on this point. He has a couple of numbers he looks at to know if he's doing
good. Although many of us would rather do anything but look at our financials,
Bob insists that at the end of the day, the only thing that really matters is
the numbers. Bob says he doesn't have debt and we're happy to say we're in the
same boat. We agree with many who say, "cash is king" because it allows you to
move on ideas, take advantage of discounts and bulk purchasing and expand when
you're ready. By implementing strict financial controls, many of the business
owners we study here at Small Business School have built powerful companies
with little or no help in the beginning from financial institutions. We have to
earn the right to have a banker.
Topic for
Discussion: What kind of financial control is needed?
Answer: For
a very small business, cash flow is the most basic way to look at the financial
situation. You must have a system in place to collect and you must be able to
pay your suppliers. Often small business owners have to take out personal loans
to keep a business going because the cashflow is so poor. The reason is simple.
In most businesses there is a time gap between the making of a product and the
ability to collect on the sale of the product.
As a business
grows, the accountant will develop monthly profit and loss statements. Just as
every game has a scoring system, in business, money is the way you keep
score.
Topic for
Discussion: How does David Milly keep track of his business?
Answer:
Janet, his wife and CFO, creates a weekly document she calls a, "Flash Report."
It tells David everything he needs to know about recievables, payables, new
customers, and sales.
Topic for
Discussion: How is it that a very young employee at Hot Dog On A Stick
knows so much about the cost of doing business?
Answer: Hot
Dog On A Stick is employee owned and there is continous training which provides
everyone with financial data. The training is specific enough so that every
employee knows how they are personally contributing to the company's
profitability.
You think about
it: What system do you have in place to track your financials and what
numbers do you track most closely? |
