Business Tip: Demystify finance
By Joe Humphreys
As the year winds down and we are in the holiday season, the end of the year is just around the corner.
One of my thoughts for this time of year always involves the financial statements of a business and the planning for next year.
December is a good time to make sure your financial statements are accurate and reflect the past year in both your earnings and financial position statements.
Then, what do you do with the accurate financial statements you have? In September, I completed training for a program called Profit Mastery, created by a company named Business Resources.
The overriding message from the program is to "Demystify" finance with a basic "Keep It Simple" approach.
The idea of "Keeping It Simple" and creating a simple, common financial language for small business is very appealing to the work we do at UHV SBDC.
Furthermore, taking the financial statements you have prepared for the past year and turning them into decision assistance tools is important.
Remember, financial statements represent the past and are very effective in implementing effective costing and pricing strategies.
Also, they will help in understanding, predicting and controlling patterns of cash flow.
Currently, in our area, there are a lot of businesses experiencing growth and growth opportunities.
The decision tools available with the Profit Mastery program help with effectively managing growth. Also, with these types of information and strategies in place, bankers should have more information to help with your business opportunities.
The Profit Mastery program has seven steps to building value in business and is the core of the program. The seven steps are:
Proper planning is the most important element to the success and survival of your business.
Monitor your company's financial position on a regular basis. The key to this is having accurate and timely financial statements to use. It is very important to use the information to identify your business's strengths, weaknesses and opportunities, along with decisions you have to make.
Understand the relationship between pricing, volume and cost. Also, understand your company's break-even point and do break-even analysis.
Manage and understand your cash flow, including trends and needs.
Manage growth properly. This is where a financial GAP analysis of your business will pay off.
Borrow properly. Match the type of loan, short term, intermediate, and long term financing.
Plan for transition. This is also referred to as your exit strategy. It is never too early to plan for this.
The Profit Mastery program is used by our counselors with UHV SBDC clients. It is also available as a training for small businesses and lenders.
For more information, contact the UHV-SBDC at 361-485-4485, or firstname.lastname@example.org. Joe Humphreys is the Director of the UHV SBDC and can be contacted at email@example.com.