Our two most recent posts, we’ve discussed that there are 4 critical items to understand your financials. 3 come from the balance sheet (asset quality, liquidity and leverage) and the 4th comes from the income statement (profitability).
In our last post, we discussed that of the 4 critical items, (Profitability, Asset Quality, Liquidity and Leverage) 3 of them are from the Balance Sheet. The 4th, Profitability is on the Profit and Loss Statement, sometimes called the P&L or the Income Statement.
We believe it’s critical for every business owner to know how to manage money once it’s in the business rather than just making sales. And it can be even more impactful if all employees are empowered to know how the decisions they make affect the bottom line and top line of the business. In order to drive performance in your organization, you should have priorities based on the metrics you measure for your business. Those metrics are typically in the areas of profitability, asset quality, liquidity and leverage. (PALL)
I thought this would be a good follow-up to my last post “5 Things to Know Before You Borrow.”
Many of us get an annual physical, the doctor checks us out to see how things look like cholesterol, blood pressure, heart rate and respiration and compare them to last year. We want to manage our physical health to be the best version of ourselves we can be.
Many business owners look at their profit and loss statement and determine if they're profitable or not. How is revenue tracking against last month or last year? Any changes in gross or net profit margin? If I'm making money then everything must be ok. There is some validity to that way of thinking.
When you first start your business and begin recording business transactions, you must decide whether to use cash basis or accrual basis accounting. The big difference is in how you record your cash transactions. Many people use cash basis accounting for taxes and accrual basis for managing the business. Here are 5 things you must know when considering which to use.