Accounting for the Numberphobic: A Survival Guide for Small Business Owners

4. If a company’s short-term debt keeps expanding, but its inventory and accounts receivable grow even faster, it is using banks to compensate for poor working capital management. Eventually, the banks will stop management from continuing this practice by threatening to call or actually calling the loan (demanding repayment), which they can do on very

As a manager of a small business, you probably don’t have brand equity. Don’t worry; just know what it is so if you do see it, listed usually on the Balance Sheet of a publicly traded company, you’ll know what it means.

My response to the client’s complaint was this: The client is paying for the doctor’s specialized knowledge. In other words, the client is paying for the years of experience, not the hours to complete the task. Service providers need to know the value of their expertise, and communicate that effectively to clients.

What’s the moral of the story? One very large client can rattle your gross margin, cash flow, and profits to the core. Don’t try to get the one big client and think life will be easier. It rarely works that way, especially when a business is small. The business takes on a lot more risk when it sells to large clients. It’s also harder to control gro

Mathematical formulas called ratios are very valuable in the analytical process. They should be used to compare the company’s performance against: Its standards of performance (budget) Its past history (trends) The performance of other companies in a similar business (benchmarking)

Businesses do not exist to break even or to show a loss for an extended period of time. If a business serves customers superbly, offers creative solutions, and takes on risk, it should be compensated for that. Positive net income is the key to staying in business.

A going concern is a business that is self-sustaining with predictable revenue streams, reasonable expenses, and adequate cash levels to pay its bills. Building such a business must be the goal of every small business owner/manager.

(You should really be looking at this at the end of every week, by the way. Can’t stress this enough.)

Most of the small businesses that fail do so because the entrepreneur doesn’t have a general understanding of the numbers of the business. My philosophy is that numbers make the business. They are not hard to understand. You don’t have to be schooled in accounting. I was an accounting major in college and I didn’t get it because I didn’t want to ge