It is scary to me how many business owners cannot read their own company financial statements let alone understand them. Any business owner who wants to grow their business should have at least a basic understanding.
So here we go:
The two basic Financial Statements are the Balance Sheet and the Profit & Loss Statement or P & L.
A couple of years ago, I was retained to help a struggling business regain its profitability. After six days, I told the CEO that the problem was not sales-related. The problem was too much overhead and debt. The CEO disagreed with my assessment – and to my great relief my contract was quietly terminated. The company went out of business eight months later.
Running a debt-free business is probably contrary to everything that you have ever learned. And you might wonder why you should do it.
If you think about a problem that you have in your business I can guarantee you that there is a solution out there, a technology or whatever that will help you better leverage your time, energy and your money – Affordably.
Cash is the lifeblood of the business. Without it, you can’t pay bills, you can’t expand the business and you can’t pay employees. Most importantly as the business owner, you can’t even pay yourself!
Your business can show the most fantastic performance according to the income statement, with huge profits and yet have nothing left in the bank. In this situation your business would not survive. How could this occur? It could occur if you are not monitoring the cash flows of your business.