I’ve been working with business owners for many years, and it always surprises me how many only organize their financial data at tax time. Your numbers tell you very important information about your business. Knowing your numbers, right now, can make the difference between success and failure.
I know you’re probably thinking, NUMBERS?! I hate numbers! I don’t know anything about accounting. I just want a numbers fairy to swoop into my businesses and take care of it for me.
Consider this – you write checks and make deposits. Maybe you collect enough information to pay your sales tax. You think your sales have been pretty decent because you have a few bucks left in the checkbook. You just recently started working on a large contract and BAM! You have no idea why you don’t have money for this week’s payroll. What happened? Lack of planning is what happened. You must keep up with your business trends, cycles and, of course, cash flow to stay in the game.
In his book Small Business Management, Michael Ames gives the following reasons for small business failure:
1. Lack of experience
2. Insufficient capital (money)
3. Poor location
4. Poor inventory management
5. Over-investment in fixed assets
6. Poor credit arrangements
7. Personal use of business funds
8. Unexpected growth
With the exception of numbers 1 and 3, each of these reasons is related to the numbers.
The Securities and Exchange Commission has an easy to understand Beginners Guide to Financial Statements at www.sec.gov/investor/pubs/begfinstmtguide.htm. It’s a quick easy read that provides basic accounting understanding.
There are many ways to stay on top of your numbers. You may decide to hire someone to do it for you. You can do it yourself using a manual system. The Dome System Products, found online or in office supply stores is one that is very easy to use and understand. There are several very user-friendly computer software products on the market, too. Personally, I like QuickBooks®. It’s intuitive and easy to use.
Remember – knowing your numbers can make the difference between success and failure. Meet with an SBDC Consultant to talk about your numbers or sign up for one of our QuickBooks® workshops in 2012.
Donna J. Simpson
The University of Scranton SBDC