Mind Your Business: How To Safely Accelerate Your Financial Engine

Driving without a map can be frustrating, especially for the passengers

. The driver may have an idea of the final destination but the road map is hidden from everyone along for the ride. Similarly, a business leader may believe he has the financial condition of his company clearly in mind. He could be wrong and other stakeholders are kept in the dark. This leads to business missteps and financial blunders. The key is to correctly assess and monitor your business condition and the condition of your competitors through accurate financial statement preparation and analysis.

So here is the operating manual for your business finances. Follow these five basic steps to understand your financial condition and make more informed decisions for an enjoyable business growth trip.

Vacuum The Financial Data Crumbs: The first step towards a clear picture of your business finances is to collect all the financial data from the floors, drawers and cup holders in your company and organize it into a readable format. A financial accounting and bookkeeping software program makes easy work of compiling information. The data collection and organizing process can be time consuming and tedious but is the strong foundation upon which financial analysis happens. Hire a professional bookkeeping or accounting service if you need help organizing data.

Unfold Your Financial Map: The next step is to pinpoint your location on a financial map after you have the raw data swept into some kind of financial reporting system. The three basic folds of your financial map include a balance sheet, income statement and cash flow statement. Your balance sheet is a snapshot in time of what you own and what you owe. Your income statement tells the story of how you made money and how you spent it. The cash flow statement clears the smoke of accrual accounting for a clear view of the sources and uses of cash in your business.

Understand The Financial Map Legend: Every business owner should have an elementary understanding of accounting principles. You don't need to be a CPA but you should know the difference between debits and credits, cash and accrual, income and expenses and debt and equity. There are many sources of basic accounting knowledge including self-help books, traditional college courses and executive coaching services. Get a solid foundation through executive education and do not take your hands completely off your financial wheel. Trust is a wonderful thing but be able to verify what your accountant is doing.

Scan Your Financial Instruments: So you are driving your company down a beautiful country road and admiring the majestic lending trees, hypnotic marketing vistas and ethereal information technology clouds. But you are unaware that the company financial engine is overheating because you did not watch the instruments on your data dashboard. Learn to read and understand basic financial statement gauges including operating, leverage, debt coverage and liquidity ratios. Keep a maintenance record by using time-series financial statement analysis. Find out how your company engine measures up to your competitors through cross-sectional analysis before you take another lap on your industry racetrack. Hire a management consultant, financial analyst or executive coach for training and to help monitor these important performance indicators.

Put Your Financial Top Down: Financial records and competitive information should generally be held in strictest confidence. However, there are stretches of business road where it is good to put the top down on your business finances and let certain groups see into the cockpit. Lenders can make more informed credit decisions if they have clearly presented and complete financial information. Your business might get better loan terms and pricing with full financial disclosure and a solid lending relationship. You might open your financial hood for potential investors and other stakeholders so they can see the finely tuned engine that will propel business growth. Consider hiring outside consulting help to assist with strategic planning and financial stakeholder presentations to put your best foot forward.

You can drive your business finances and expertly accelerate your financial engine with the right executive training, education, systems and experience. Keep the rubber side of your business coupe down and firmly in contact with the financial road at all times. You will see many company wrecks along your industry highways. Carefully prepare your business records and monitor the performance gauges to avoid a financial accident.

by: Michael Shelton

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