17 October 2013 category: business administration & finance
Tags: business finance
Every business needs a certain amount of financial information by law, but successful businesses always produce more information than is required because they want to ensure that they use financial data to the full in order that they can maximise their profit.
The majority of business owners and managers do not receive any formal training in finance, which means that for much of the time they are unable to harness the power of their information to take day to day decisions that lead to better business management and higher profits.
There are four main types of financial information.
- Profit and loss accounts
- Balance sheets
- Cash flow
Each area has a specific function, but they should be viewed together to give a complete picture of the finances of your business.
The key questions that a business owner or manager needs to ask are:
- How much money have we got in the business?
- How much of this is funded by external sources such as overdraft, bank loans or creditors?
- What are our total assets?
- What are our total liabilities?
- What is our liquidity; in other words, do we have enough cash to meet our short term liabilities?
- How efficiently is our money working for us?
- Are we getting a good return on our capital?
- Are we making a reasonable profit in relation to our risk?
One of the key points for any business is to find out precisely where its profit is coming from. For the majority of businesses it follows the Pareto principle; 80% of the profit comes from 20% of the customers. Whilst all businesses need similar information, there is no doubt that financial information and measurements can vary quite widely between one business and another.
Improve your business finances with the Business Transformation Toolkit
Section 02 includes the following:
- The importance of financial information.
- A definition of the four types of financial information that you need.
- The four reasons for managing financial information effectively.
- Profit and loss accounts explained.
- Balance sheets explained.
- Understanding the capital of a business.
- Cash flow explaoned.
- How to improve cash flow.
- The six stages of preparing a budget.
- How to use your financial information to protect your money and guide your decisions.
- Gearing explained.
- How to improve your liquidity.
- Measuring the financial efficiency of your business.
- Profit explained.
- Using finance measurements and ratios to enhance your profit.
For details, go to www.stayoutfront.com/toolkit