Take Action Now to Improve Your Business' Financial Health

This April I am participating in the "A to Z" Challenge! This means that each day except Sunday I will be posting articles using the letters A to Z.  It should be lots of fun. The letter of the day is: A. The word of the day is action!

It is magnificent to take action to improve the financial health of your business. Everyone has heard stories about celebrities, athletes or trust fund babies who have lost millions of dollars due to their inability to have a clear understanding of their financial condition. This also happens in the business context. I have often been amazed at how many of my business clients have no idea what is the financial condition of their businesses. I ask them for sales figures or about their receivables and payables aging and I am given blank stares in response. Often information that should be readily available to entrepreneurs is unknown. What is even worse is the fact that many e entrepreneurs do not have the ability to quickly get the information into their hands when needed. The basic information I am referring to is information such as:

* current income
* expenses
* cash flow
* accounts receivable
* accounts payable
* taxes due to local, state and federal authorities

 

photo credit: World Bank Photo Collection via photopin cc
photo credit: World Bank Photo Collection via photopin cc

Many entrepreneurs rely upon a bookkeeping service or an accountant to keep their financial records in order. For entrepreneurs without knowledge and expertise in basic accounting hiring an accounting professional is a good idea. However, that does not excuse the entrepreneur failing to get the reports from the professional on a regular basis and become familiar with the information. If you have hired an accounting professional to keep these things in order for you, that is a good start. However, you must go further than just a good start. Take the time and spend the money to have your accounting professional or someone on her staff explain all your accounting records to you so that you understand them. Keep in mind, accounting professionals are paid for their time. This means if you want them to sit and go over the reports with you in detail and to teach you what you need to know to use those reports, you will be asked to pay for that time. This is not an area to be stingy, pay the money and get the understanding.

 

photo credit: jeff_golden via photopin cc

 

 

Take the time today to get a clear understanding of the financial health and condition of your business by taking a long hard look at your accounting records. If you do not have any, get some. If you have them and don't understand them, go get understanding. If you have them and understand them, start using them to take the financially appropriate actions in your business.

Every person who wants to be in business or who is already in business must get an elementary understanding of accounting principles, reports and terminology. This can be done informally by doing some on-line research or formally by taking a basic accounting course at the local community college. A basic accounting understanding will teach an entrepreneur basic accounting terms and procedures that will help make it easier to run a successful business. Some basic principles, terms, and practices that are important include:

* account ledger
* journal entries
* accounts aging
* accounts payable
* accounts receivable
* cash flow
* balance sheet
* income statement
* profit and loss statement
* fixed expenses
* variable expenses
* cash method accounting
* accrual method accounting

If you are an entrepreneur looking at this list of basic items and do not know what all of them are, it is time to brush up on your accounting information. As an entrepreneur it is crucial to your success for you to know the financial condition of your business. Once you understand what each journal, report and statement is, you are in position to compare the information from one month to the next, one year to the next.The financial information found in regular and complete accounting records should influence business decisions. It is a mistake to hire new employees in March if your cash flow statements show your business' sales slow down to a crawl in April and May. A good understanding of your business' financial picture, helps you make important decisions on things like expansion, when to hire new employees or if employees need to be removed from employment.

 

Photo Credit: Janeane Davis, Action Take Action Now to Improve Your Business' Financial Health
Photo Credit: Janeane Davis, Action Take Action Now to Improve Your Business' Financial Health

 

In conclusion, it is magnificent to improve your financial health. So, the question for you this magnificent day is, what steps are you taking to improve the financial health of your business and make best use of your accounting records?

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Tags: action, business, finance, now, take

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