TC: LONG TERM GROWTH
“You can’t grow long-term if you can’t eat short term.”
This quote came from Jack Welch, CEO of GE. Although GE is a large company, this quote is very applicable to small business owners.
The two most mentioned problems that small business owners have are:
- Lack of working capital.
- Lack of new business.
Your challenge this week is to review your accounting system, its effectiveness and the reports it generates for your review. Unfortunately, accounting is one of the most neglected responsibilities but one of the most important ones.
The focus for this challenge is The Balance Sheet and The Income Statement.
The Balance Sheet if a snapshot in time of what everything your business owns and everything it owes at a particular moment. It shows all your assets and all your liabilities. The difference between those two is your equity.
The Income Statement sometimes called a Profit and Loss statement, is a summary of a company’s income-producing activities over a specific period of time. In summary, it includes all your revenue and from that is subtracted the Cost of goods sold, all your expenses including income taxes, and the result is your net income. This should be completed on a monthly basis.
There is a lot more to small business accounting but these two items should be available for your review at all times.
The challenge: Create a balance sheet and to set up the necessary process to produce a monthly Profit and Loss Statement.
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Tips & Advice by Nick Petra, CFP – Founder of BizQuack and StrategicDuck
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