The Importance of Business Financial Analysis and Management

Planning and Control are the two most important ingredients to a Successful Business. A Business Plan takes most of the guess work out of Business Strategy and Control through solid Financial analysis. Financial Data provides a way to gauge where you are in your Strategic Plan, telling you where changes in your Plan are necessary. Because of this, Financial Data Analysis and Management are vitally important to running a successful business.

It is extremely important to have a suitable Accounting System installed throughout your business so data acquisition is easy. You cannot manage your Business for Profitability without a good Accounting System. My CPA has a bookkeeper who comes out to the business to help install the Accounting System and show us how to work it. All of this is done with the guidance of the CPA but at a fraction of the cost. A good Bookkeeper is invaluable in helping capture Financial Data. Having an established working Accounting System in place will minimize the fees a CPA charges to analyze your tax liability and prepare your tax returns.

An Accounting System is typically built around the following key Financial Management tools:

– Income Statement (Profit & Loss Statement)

– Cash Flow Statement

– Balance Sheet

– Budget

– Breakeven Analysis

By having a Financial Management system in place, you can easily identify early warning signs or spot particularly profitable areas. Not having a system in place to analyze and organize Financial Data makes it impossible to effectively manage, grow and control a business. It makes it impossible to gauge the success (or lack there-of) of your Planning and Strategy. Moreover, used incorrectly, inaccurate Financial Data can be disastrous for a company’s livelihood.

An Accounting and Financial Management System is only as useful as it is used systematically throughout an entire business. It is extremely important to implement the system into the very fabric of the business and be used systematically. The Accounting System is a reflection of the health, or lack thereof, of a business and from which business decisions are made. Make sure to set it up right, train your people on it and most importantly, use it!

Two principal objectives of any business are to be Profitable and have Cash Flow to pay obligations. The Income Statement and Cash Flow Statement figure prominently in this area. The Income Statement represents how well a Company is operating, and the Cash Flow Statement shows how well a business is managing its Cash. Profit or Loss on one side and Liquidity on the other.

The trick is to find a good balance between Profits and Liquidity, which when not well planned for, can be very difficult to maintain. Fast Growth with high profits can drain the liquidity of a business, so being Profitable is no guarantee you’ll stay in business. The role of the existing and projected Cash Flow and Income Statement is to help you identify problems areas so you can effectively plan for them, such as raising more capital, infusing more equity or obtaining finance. Moreover these two statements help you identify areas which can be better controlled and managed, forestalling the need of additional capital and funding.

The Breakeven Analysis is based on the Cash Flow and Profit & Loss Statement. The Breakeven Statement and Chart is extremely important because it shows the revenue volume from sales that are required to precisely balance the sum of your fixed and variable expenses. The Breakeven Analysis can be extremely helpful when:

– Setting Product and Service Price Levels

– Deciding whether to purchase or lease equipment / building

– Figuring out profit projections based on various sales levels

– Determining if new employees are required

– Planning ahead for finance / capital required in the future

– Making Strategic Objectives more tangible and achievable

– Measuring your Company’s progress toward Profit goals

The Balance Sheet records the past effects of company decisions (or lack thereof) and projects the affect of future Plans. The Balance Sheet is a record of the company’s Liquidity and Owner’s Equity. These variables are directly affected by the Income and Cash Flow statements. The Balance Sheet is the often overlooked Financial but it has a lot of utility:

– Shows the effect of past decisions

– Keeps track of a Company Cash Liquidity Position

– Records the level of Owner’s Equity

– Quickly shows the condition of the business

A Budget Analysis compares a Company’s Actual Performance to Projected Performance on a monthly, quarterly and annual basis. The Budget is a great tool to guard against excessive, unmitigated expenses and is closely tied to the Strategic Objectives the company has set. Analyzing the Income Statement and Cash Flow Statement projections against Actual Performance is an excellent control tool, which can quickly address problems before they become too severe. Little oversights and mistakes in a Company’s Projections spread over time can have a disastrous affect. The Budget Analysis is your guard against that.

Working together, the Income Statement, Cash Flow Statement, Balance Sheet, Breakeven Analysis and Budget Analysis provide a complete picture of a company’s Current Operations, Liquidity, Past Operations and Future Viability. Working through an interactive Accounting System can be a very useful tool in determining future business scenarios and analyzing past mistakes. Understanding the financial implications of your Financial Decisions can mean the difference between your company’s success and failure. Probably the most important financial is your Cash Flow Statement but understanding all of these financials and how they work together is the key to a company’s success. Projections are based on assumptions – make sure these are well thought out and as realistic as possible.

Success After 50 – How To Achieve Financial Success Even If You Are Over Fifty

Can you really achieve true success if you already over the age of fifty? Yes, success is something that is defined by you and can be achieved at any age and under any circumstances. I am over fifty and have now finally reached the place in my life where I feel successful. I am happy, have a great relationship with my spouse and family, own my own business that I can run from home or anywhere I happen to be, have great health, and own a beautiful home. But my life was not always this way. Allow me to explain.

I grew up in a poor family where everyone was always worried about money. My mother was sick all the time, and I was kept home from school many days just to take care of her and my younger brother. We never took a vacation and lived in run down apartments that never had enough room for us.

I believed that life was supposed to be hard. When I grew up and got married, we were also very poor. We struggled just to get by and pay the bills. Then my health became an issue and I could no longer work. I felt like I was living the life I had known as a child. I did not want to go on that way. I began to search for answers and finally read Napoleon Hill’s book called Think and Grow Rich. This book gave me a feeling that I could do anything. I began to practice what was discussed in the book. After just a few months my life began to change.

It has only been two years and I am a different person. My family has now read the book as well and we recently discovered that there were more secrets behind the idea of thinking and growing rich. I will never be the person I was in the past. The struggles for financial freedom are gone and I am now in the position to help others. I encourage you to learn more about becoming successful at any age.

Financial Stress Is the Number One Cause of Divorce

Financial difficulties, and the stress that accompanies them, are the leading causes of divorce. Nearly every marriage goes through monetary trouble, but is divorce the solution? I don’t think so! My conviction is that, if you and your spouse can get through all that debt and all those bills, the process will actually make your marriage better.

Divorce is also the number one reason for people filing bankruptcy. A big debt can certainly break up your marriage, but what benefit can a divorce have on your finances? Many couples don’t even discuss money issues, plan a budget, or set back savings. Why would divorce be the answer to this communication problem? A divorce can be expensive and will thus propel you further into debt. But the most costly part of the divorce process will be losing the love of the person you vowed to remain loyal and devoted to. Your marriage vows included “for richer, for poorer” — not “for richer and richer.”

You need to spot money problems early and attack them together to avoid disaster. Casting stones, belligerence, and screaming at a spouse does nothing to eliminate financial stress and, instead, takes the focus from solving the problem at hand. Don’t let your debt run your life; step up to the plate and assume control of your finances. The key is to work together on a realistic and reasonable budget based on the goals that have been set. Track your spending, and make your dollars go further by sticking to this budget once it is in place. You will have a step by step formula for figuring out where the most important place to utilize your money will be. You can then determine what expenses you can cut back on or hopefully eliminate.

Begin a savings account. I have a habit of telling my clients to open a savings account on the other side of town. The reasoning behind this is: the temptation to draw out funds is will not be increased by convenience. Even better than that, use an automatic withdrawal system to set aside a predesignated amount from each paycheck. The best strategy is to try it out with a small sum at first, then increase the amount periodically for as long as you can. Unexpected bills and emergencies are unavoidable. It’s good to be financially prepared for them by keeping some money set back.

Use the money Jesus has blessed you with wisely, as he doesn’t want us to be slaves to debt. We must trust in God, because he knows what we can handle. He will continue to bless us with more if we prove smart and able to handle his prized possessions. When we trifle with the possessions and blessings we’ve already been given, the Lord usually takes them away.

Do not panic over financial stresses. Don’t presume that placing blame on your spouse or even contemplating divorce is the answer to the crisis. Sit down together, take a deep breath, and grab that legal pad to put the issues in writing. To ascertain your needs, visualize your situation. Call creditors and talk to them about hardship programs. Take a part time position to tide you over.

Contact a credit counselor who can help you make better financial decisions from here on out. By seeking counsel from a professional you will share the burden of overcoming your financial troubles. Facing them alone will make things more challenging and costly.