One of the problems steadily faced by small business and departments are managing cash flow. With a commitment and discipline to keep track of the variables involved in the process, you can have an up-to-date snapshot of where things are always at. You need to have a good system in place to make it happen.
Here are five statements that you need to measure and have before you at all times according to score:
1. Income and profit and loss statements show the company's sales, cost of goods sold, and gross and net profit. These statements, which measure your business's profitability should be analyzed on a monthly, quarterly and annual basis.
2. Operating cost estimates project where a firm will spend its money. The projection can be compared against actual expenses shown in the income statement on a monthly basis. When expenses are viewed by category, you can compare your own operating expenses to industry standards.
3. Balance sheets provide a snapshot of the liquidity of the business, how much cash is on hand to meet debts, and how much cash would remain if all current payables were met at that time.
4. Aging statements summarize the age and due dates for both accounts payable and receivable. This information shows how well your business is meeting its debt obligations and whether customers are meeting their debt obligations to your business.
5. Inventory control statements track inventory levels against consumer demand. You should be able to monitor how many times an item or the entire inventory turns over during the year. Improving inventory turns improves cash flow and results in newer, fresher merchandise for your customers.
It is really true that a business that is run well will have an excellent bookkeeping and accounting system in place. But, more than that, will have those that have the discipline to continually look at the numbers to understand what is happening and make the proper adjustments.
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