Four Things Your Accountant Should Have Told You When You Started Your Business
Here are four things your accountant should have told you when you started your business.
Cash is King. Income is good. Profit is great. But you can’t pay your bills or your employees with either. You need Cash. Cash is King. Growth typically means you need more cash to pay your expenses up front before you get paid. Most companies that fail due to financial reasons do so because of a lack of Cash, not lack of Profit.
Cutting Expenses Alone Will Not Make You Successful. Expenses are cut to make numbers when other parts of the goal have fallen short, typically Sales or Income. While cutting expenses can help you make an EDITDA or Net Profit number, it is a failure when this is how you get there. Growth, the top line of the business, is the most consistent sign of success.
Your Banker is Your Friend. Your bank is your best supply of short-term cash. The two most common reasons for needing short-term cash are growth (e.g. more sales staff, investment in fulfillment, new product opportunity), or failure (e.g. use your imagination). Meet with your banker quarterly. Share your financials and tell them your company’s story and ambitions. A banker who knows your company and how it is doing is in a much better position to support you. If they won’t meet with you, find another bank.
Happy Customers and Employees Can Put You In The Poorhouse. Many business owners are very generous people who consider their customers and employees as extended family. The problem is, they are not. Make investment in your customers to gain, grow or retain their business. Make investment in your employees for increased productivity and performance. Investment presumes a measurable return. Trying to buy “happiness” is a bottomless pursuit.
Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.
– Will Rogers