Benefits of Accounting and Financial Management

If you are in business, you know that it is important to understand how your business is performing. In order to do that, you need some way to keep track of and interpret the numbers that go along with your business. This is where accounting and financial management come into play. Accounting tools can be used to measure and interpret the financial progress of your business. They can also help you communicate the status of your business to important third parties, such as banks and the government. Here are some of the benefits of accounting and financial management.

No more guessing. By maintaining an accounting system, you can improve your odds of making the right decision for your business. While the information alone is not the only factor to consider, it does provide one very important piece of the puzzle in your decision making process. Good accounting records show you where you stand financially, so you won’t have to guess at what your financial position is.

Make better decisions. Accounting plays an important role by giving us a means of communicating the financial part of a business to others. The most crucial function of any accounting system is to provide real data, by which managers and owners can base their decisions. Having numerical facts greatly helps in making profitable decisions for your business. And while the accounting information gathered does not guarantee a good decision, it does greatly improve your chances of making the best decision possible.

Solve problems. Accounting systems provide reports that help you analyze the profitability and performance of your business. Not only can an accounting system help you make decisions, but it can also help you find areas of your business that need to be improved. Once you are able to identify trouble areas, you can focus on improving them.

Track complex information. If your business requires any loans, the lending institution will likely require financial reports to understand the net income and net worth of your business. They may also want to evaluate your financial statements periodically to monitor your ability to repay the loan.Providing this kind of information is next to impossible without an accounting system that can provide financial statements.

Good accounting records show where your business stands financially. Use every advantage available to your business to improve and enhance its performance. Implement and maintain your accounting and financial management system, and your business will be on its way to financial success!

The Importance of Business Financial Analysis and Management

Planning and Control are the two most important ingredients to a Successful Business. A Business Plan takes most of the guess work out of Business Strategy and Control through solid Financial analysis. Financial Data provides a way to gauge where you are in your Strategic Plan, telling you where changes in your Plan are necessary. Because of this, Financial Data Analysis and Management are vitally important to running a successful business.

It is extremely important to have a suitable Accounting System installed throughout your business so data acquisition is easy. You cannot manage your Business for Profitability without a good Accounting System. My CPA has a bookkeeper who comes out to the business to help install the Accounting System and show us how to work it. All of this is done with the guidance of the CPA but at a fraction of the cost. A good Bookkeeper is invaluable in helping capture Financial Data. Having an established working Accounting System in place will minimize the fees a CPA charges to analyze your tax liability and prepare your tax returns.

An Accounting System is typically built around the following key Financial Management tools:

– Income Statement (Profit & Loss Statement)
– Cash Flow Statement
– Balance Sheet
– Budget
– Breakeven Analysis

By having a Financial Management system in place, you can easily identify early warning signs or spot particularly profitable areas. Not having a system in place to analyze and organize Financial Data makes it impossible to effectively manage, grow and control a business. It makes it impossible to gauge the success (or lack there-of) of your Planning and Strategy. Moreover, used incorrectly, inaccurate Financial Data can be disastrous for a company’s livelihood.

An Accounting and Financial Management System is only as useful as it is used systematically throughout an entire business. It is extremely important to implement the system into the very fabric of the business and be used systematically. The Accounting System is a reflection of the health, or lack thereof, of a business and from which business decisions are made. Make sure to set it up right, train your people on it and most importantly, use it!

Two principal objectives of any business are to be Profitable and have Cash Flow to pay obligations. The Income Statement and Cash Flow Statement figure prominently in this area. The Income Statement represents how well a Company is operating, and the Cash Flow Statement shows how well a business is managing its Cash. Profit or Loss on one side and Liquidity on the other.

The trick is to find a good balance between Profits and Liquidity, which when not well planned for, can be very difficult to maintain. Fast Growth with high profits can drain the liquidity of a business, so being Profitable is no guarantee you’ll stay in business. The role of the existing and projected Cash Flow and Income Statement is to help you identify problems areas so you can effectively plan for them, such as raising more capital, infusing more equity or obtaining finance. Moreover these two statements help you identify areas which can be better controlled and managed, forestalling the need of additional capital and funding.

The Breakeven Analysis is based on the Cash Flow and Profit & Loss Statement. The Breakeven Statement and Chart is extremely important because it shows the revenue volume from sales that are required to precisely balance the sum of your fixed and variable expenses. The Breakeven Analysis can be extremely helpful when:

– Setting Product and Service Price Levels
– Deciding whether to purchase or lease equipment / building
– Figuring out profit projections based on various sales levels
– Determining if new employees are required
– Planning ahead for finance / capital required in the future
– Making Strategic Objectives more tangible and achievable
– Measuring your Company’s progress toward Profit goals

The Balance Sheet records the past effects of company decisions (or lack thereof) and projects the affect of future Plans. The Balance Sheet is a record of the company’s Liquidity and Owner’s Equity. These variables are directly affected by the Income and Cash Flow statements. The Balance Sheet is the often overlooked Financial but it has a lot of utility:

– Shows the effect of past decisions
– Keeps track of a Company Cash Liquidity Position
– Records the level of Owner’s Equity
– Quickly shows the condition of the business

A Budget Analysis compares a Company’s Actual Performance to Projected Performance on a monthly, quarterly and annual basis. The Budget is a great tool to guard against excessive, unmitigated expenses and is closely tied to the Strategic Objectives the company has set. Analyzing the Income Statement and Cash Flow Statement projections against Actual Performance is an excellent control tool, which can quickly address problems before they become too severe. Little oversights and mistakes in a Company’s Projections spread over time can have a disastrous affect. The Budget Analysis is your guard against that.

Working together, the Income Statement, Cash Flow Statement, Balance Sheet, Breakeven Analysis and Budget Analysis provide a complete picture of a company’s Current Operations, Liquidity, Past Operations and Future Viability. Working through an interactive Accounting System can be a very useful tool in determining future business scenarios and analyzing past mistakes. Understanding the financial implications of your Financial Decisions can mean the difference between your company’s success and failure. Probably the most important financial is your Cash Flow Statement but understanding all of these financials and how they work together is the key to a company’s success. Projections are based on assumptions – make sure these are well thought out and as realistic as possible.

Small Business Owners: Tips for Balancing Your Business and Family Finances

Meeting the multiple demands of a job and family can be challenging for anyone, but for small business owners, the feeling of being pulled in different directions can be especially taxing. With limited time, energy and money at your disposal, finding the right mix may seem impossible – but it doesn’t have to be.

1. Make time to plan and organize. Small business owners often assume multiple roles at work – CEO, office manager and HR generalist, to name a few. It’s easy to understand why your personal finances may not be at the top of your priority list. Instead of multi- tasking, consider scheduling a regular time each month to sit down with your household balance sheet. While this may not be a relaxing activity, knowing your current financial position, and having a plan for the future, can help alleviate stress in the long-run.

2. Communicate with your family. It’s important to keep in mind that your family is a stakeholder in your business, especially if it provides a significant portion of your household income. Speaking openly and frequently about issues you’ve encountered and decisions you’re faced with can help strengthen your relationship with your spouse and children, while also providing you with different perspectives. But, while your family’s needs and wants should always be considered, make sure your final decisions also reflect what’s best for your business.

3. Be realistic. Needs and financial demands change over time. Regularly assess the profitability and growth potential of your business, as well as your household financial situation. If you must make small sacrifices in your personal life, do so, but remember that this works both ways. You may also need to make difficult trade-offs, such as delaying a business expansion in order to make a down payment on a new home or pay your child’s tuition. If you currently have the resources to invest in both, take advantage of the opportunity, but also ensure your actions support your long-term goals.

4. Don’t try to wing it. Whether you’re making decisions for your business, family or both, don’t feel like you need to go at it alone. Talk with other professionals in your network to see what works for them. Consult with a financial advisor, accountant and attorney before you make major financial commitments or sign complicated agreements. And most importantly, treat your personal financial plan and business plan with the importance they deserve – put them in writing. Not only will this help hold you accountable, it will also give you something to refer to when those difficult and inevitable choices arise.

Taking these steps – and feeling confident about your complete financial situation – may help you avoid absolute “one or the other” decisions, and be successful in both your business and personal life.

Achieving Business and Financial Success

Success in life and success in business are not the same thing. Of course, business and finance are huge and important components of our overall lives. You’d be a fool not to pay considerable attention to these areas, without compromising the other aspects of your life.


Being successful in business and finance is not a simple task, otherwise we’d all be rich. Unfortunately, this is not the case. There is no easy, or direct path to financial achievement. People find an infinite variety of ways to amass wealth and attain success in business and commerce. Others never find a way to progress financially. People can’t decide on a career or enterprise, or how to progress once they’re there. Some squander their money. Still others have setbacks, physical or mental challenges, and so forth.


H. L. Hunt was, by any objective measures, a financially successful individual. His business acumen was well-known. He made his fortune in the oil business, and by investing.

When asked about his “success formula” Hunt offered some prescient advice. His approach is direct, but not as easy as it sounds. FIRST: “Decide what you want.” SECOND: ” Decide what you’re willing to exchange for it.” THIRD: “Establish your priorities, and go to work.” (

Hunt’s approach is definitely straight-forward. Let’s think about it. If you complete the FIRST step, you’ll probably be ahead of 90% of people, because few really know what they want. And the SECOND step represents another formidable hurdle, because, again, a majority will be unwilling to expend the effort and make the required sacrifices. The THIRD step is also tough. Getting started (and then maintaining your motivation, initiative, effort, enthusiasm, dedication, etc,) requires a strength of character and uncommon persistence.


I recommend writing things down. It seems to make it more real, and you can always refer to it. But before you write it down, you’ll need to do a lot of work THINKING. Serious THINKING. Deciding “what I want to be, when I grow up,” is as challenging at fifty as it is at twenty. No one can do this for you. Your parents, friends, spouse, or teachers may try to guide you, but ultimately the decisions and responsibilities are yours. Also, nobody can determine your priorities, nor what you’re willing to do – or give up – to get what you desire. And, after you decide if you’re willing to “pay the price,” can you continue for as long as it takes to achieve your objectives?

Follow Hunt’s formula, do the “prep” work, and if you believe you are capable of making the sacrifices and doggedly pursuing “what you want,” put that commitment in writing and to work. Best of luck!

Ben A. Carlsen, Ed.D, MBA, is an experienced leader and educator with over 30 years experience in management, consulting, and teaching. Dr. Carlsen is a management consultant, and business writer in the Miami, Florida area.

Financial Failure in Business – 10 Tips on How to Avoid It

Business is the backbone of the world’s economy. This is where the most jobs and wealth are created. A large percentage of businesses are entrepreneurial (or start out that way). Unfortunately many do no make it. This article gives some tips on how to avoid financial failure:

Detail financial planning must be done before embarking on a business. This must continue throughout the existence of the business. Planning should include cashflow projections and sensitivity analysis on key parameters.
Find out what requirements financiers have. Position the business around it; keep the credibility of the business intact and work on the relationships with financiers.
Enhance the financial acumen within the company. Management needs to understand the meaning of financial statements, cashflows and financial ratios.
Inventory should be managed at optimum levels. Have a proper stock system to manage it. Only keep stock items that moves fast or that is strategic important.
Control the growth of the business to acceptable levels. Understand how much growth is sustainable and how it will be financed.
Targeted gross margins should be well researched and form part of the business- and marketing plan. Work as far as possible to this target. Avoid doing business at all costs.
Do everything in your power to ensure that at least a minimum turnover (that cover expenses) is achieved. Research the market and do proper pinpoint marketing.
Control expenditure diligently. Know why money is spent and how it is spent.
Have a strict credit policy. Follow the policy. Ensure that customers that do not keep their commitments are professionally dealt with.
The most important aspect of the business is to manage its cashflow. Cashflows must be projected and monitor on a monthly basis (or shorter if required). Be pro-active in handling potential cashflow problems.