Angie Mohr 
Financial Management 101 
Get a Grip on Your Business Numbers

Get a Grip on Your Business Numbers Financial Management 101: Get a Grip on Your Business Numbers is the second book in the Numbers 101 for Small Business series. This book covers business planning, from understanding financial statements to budgeting for advertising. Angie Mohr’s easy-to-understand approach to small-business planning and management ensures that the money coming in is always greater than the money going out!


Analyze financial data to stay in touch with the heart of your business

Measure your business success and pinpoint new opportunities

Understand your business from the inside out


‚Even Microsoft and Ford started in someone’s basement or garage, ‚ says Angie Mohr. ‚But people all over the world have been given and idealized and unrealistic view of how to operate a business, and most discount the importance of the basics.‘

Inhaltsverzeichnis

Introduction xv
1 Refresher: Balance Sheet, Income Statement,
and Cash Flow Statement 1
The Balance Sheet 2
The Income Statement 4
The Cash Flow Statement 5
Chapter Summary 6
2 Basic Budgeting 7
The Monthly Budget Report 8
Where Do the Numbers Come From? 8
Revenues 10
Expenses 10
Chapter Summary 11
101 SMALL BUSINESS for
Contents
v
3 Variable versus Fixed Costs: Why You Need
to Know the Difference 13
Fixed Versus Variable Expenses 14
Variable expenses 14
Fixed expenses 14
Why is Cost Behavior Important to My Business? 15
Break-even point 15
Capacity 16
Chapter Summary 17
4 Ratio Analysis for Fun and Profit 19
The Basic Ratios and What They Tell You 20
Solvency or liquidity ratios 20
Asset and debt management ratios 22
Profitability ratios 24
Which Ratios Should My Business Track? 26
When Good Ratios Go Bad: What to Do When
There’s a Problem 26
Chapter Summary 27
5 Understanding the Operating Cycle 29
The Operating Cycle 30
The operating cycle timeline 32
The Cash Flow Report 32
Revenues 33
Expenses 34
Bringing it all together 34
Chapter Summary 36
6 Pricing Your Product or Service 37
Cost-Plus Pricing 38
Value Pricing 38
Competitive Pricing 39
Consumer Demand 39
Other Pricing Considerations 40
Pricing services 40
Penetration pricing 41
Pricing below your competition 41
vi Financial Management 101: Get a Grip on Your Business Numbers
Contents vii
Psychological pricing 41
Discount pricing 41
Chapter Summary 42
7 Key Performance Indicators: Your Keys
to Success 43
How Do I Figure Out What My CSFs Are? 44
How can I measure my CSFs? 44
What Happens When My Key Performance
Indicators Start to Slide? 46
Chapter Summary 46
8 Getting a Grip on Your Inventory 47
Types of Inventory 48
Retailers 48
Manufacturers 48
Service business 49
What’s Included in the Inventory Costs? 50
Inventory Management Techniques 51
Manual tracking 51
The ABC management system 52
Economic order quantity (EOQ) model 53
Chapter Summary 55
9 Accounts Receivable: The Money Coming In 57
The Sales Cycle Revisited 58
Setting Up Your Credit Policy 58
Terms of sale 59
Credit decisions 60
Collection policies 61
Factoring Receivables 62
Should I Hire a Collection Agency? 63
Monitoring Your Receivables 64
Chapter Summary 65
10 Accounts Payable: The Money Going Out 67
Supplier Financing 67
Tracking Due Dates 69
What Happens If I Fall Behind? 69
Chapter Summary 70
11 Buying New Things: Are They Going to Pay
for Themselves? 71
Projected Benefits 72
Discounted Cash Flows 73
Payback 76
Benchmarking 77
The Scarcity of Resources (or “There’s Only So
Much Cash”) 77
Chapter Summary 78
12 What’s Not Showing on Your Financial
Statements 79
The Six Big Risks 80
Operating lease obligations 80
Lack of adequate insurance 80
Personal guarantees 81
Economic dependence 82
Foreign exchange exposure 82
Interest rate exposure 83
Risk Management for Entrepreneurs 84
Chapter Summary 84
13 Investor and Manager: The Split Personality
of the Small Business Owner 87
The Small Business Manager 88
The Small Business Investor 89
Chapter Summary 91
14 Growing Your Business 93
The Three Methods of Business Growth 94
Leverage 95
Attract New Customers 95
Sell Them More 97
Sell to Them More Often 97
Tracking Your Business Growth 97
Chapter Summary 98
15 Facing the Scary, Two-Headed Banker Monster 99
Lending Money 101 100
viii Financial Management 101: Get a Grip on Your Business Numbers
Contents ix
Getting to Know and Love Your Banker 101
The Lending Proposal 101
The Care and Feeding of Your Banker 102
Other Dance Partners 102
Your Credit Score 103
Chapter Summary 104
16 Managing Debt 105
Understanding Debt Service 106
Debt service ratio 107
Payback 108
How Do I Calculate My Cost of Borrowing? 108
Bank loans 108
Lines of credit 109
Credit Cards 109
Capital leases 110
Suppliers 110
The government 110
The Danger of Leverage 111
The Debt Diet Plan 112
Analyze 112
Project 113
Act 113
Chapter Summary 114
17 Compensating Employees 115
What Are Your Employees Worth to You? 116
Office Assistant 116
What Are Your Employees Worth to Someone Else? 117
Benefits 117
Sick Days 118
Performance-Based Compensation: Paying for Value 118
The Performance Evaluation Process 119
Keeping Tabs on Employee Performance 120
Chapter Summary 120
18 Pulling It All Together: The Planning Cycle 127
The Planning Cycle 128
Planning 129
Control 130
The flash report 130
The monthly management operating plan 130
Growth 131
Fine Tuning 131
Planning 132
Chapter Summary 132
Appendix 1
The Monthly Management Operating Plan 133
Appendix 2
Present Value of $1 145
Appendix 3
Resources for the Growing Business 147
Glossary 151
Samples
1 Typical Balance Sheet 3
2 Income Statement 4
3 Cash Flow Statement 5
4 Monthly Budget Report 9
5 Cash Flow Projection 35
6 Inventory Tracking Sheet 52
7 Aged Accounts Receivables Report 64
8 Quarterly Performance Review 121
Diagrams
1 The Operating Cycle 31
2 ABC Tracking Method 53
3 EOQ Model of Inventory Management 54
Tables
1 A Quick Reference to Ratios 28
Worksheets
1 Business Risk Profile 85

Über den Autor

Angie Mohr CPA, CA, CMA is a chartered accountant and certified management accountant. She can be heard regularly on radio with Small Business Survival Tips. Mohr is also a business columnist for a large daily newspaper and has written many articles for business magazines.

Mohr believes strongly in planning the entrepreneur’s business and personal life holistically. Her approach helps business owners to understand their business better and to run personally satisfying lives and immensely lucrative businesses.

Angie is the author of these books from Self-Counsel Press:

* Bookkeepers’ Boot Camp
* Financial Management 101
* Finance & Grow Your New Business
* Start & Run a Bookkeeping Business