fdr finance 100 original quality work

1AL.  The most important component is cash flow and the management of cash flow. Whether a small business is a traditional brick and mortar or service business, if the cash flow is not consistent or properly managed the business will fail. Strong management of cash flow will assist maintaining expenses, sales, and COG. A service business may have regular customers, but if the organization does not see new customers and the COG and expenses increase, the cash flow will decrease. If there is a constant flow of existing and new customers, there will be a continuous cash flow. The small business must keep track cash flow, cost of goods (COG), new client’s, expenses, and sales to remain successful. Every small business that I know use quickbook to manage each of these areas.

 

1IM.  The most important financial components to track and help determine the success of a small business are the sales projections and the cash flow statement, because one statement estimates on how much revenue the company can acquire and the cash flow statements shows on how much the company actually did. When looking at the sales projections statement, it shows on a monthly and quarterly basis on each products and services of what can be generated as revenue. This will also be an indicator to help management evaluate the company’s progress. The cash flow statement, especially in the cash from sales from each product and or service. This will also be an indicator on how which product or service is in demand and whether the revenue is meeting the sales projections.

 

1LD. The owners of successful businesses have developed Operational Support Systems. These may be financial or non-financial, manual or automated. The objective of these systems is to support and make efficient all the activities of the organization. Well structured, they also relieve management of many day to day routine activities, giving owners more time to be strategic thinkers. The information provided by these tracking systems provide critical information on sales, cash flow and other financial performance data so that senior management can take timely action as change occurs. Red flags appear early, before problems become unmanageable.

Should small business owners place primary emphasis on cash basis or accrual basis? If so why, If not why not?

 

Four Reasons Why Small Business Succeed (or Fail). Retrieved from       http://www.businessknowhow.com/startup/succeed.htm

 

 

1ZC. The statement of cash flows is important in determining the success of a small business. It shows the cash at the beginning of a period with inflows added and outflows of cash being subtracted. The difference shows either a negative or positive cash flow which is important in keeping a business in operation. Without sufficient inflow the company will not have the cash to pay for expenses or purchase inventory. Each month a small business should report his cash flow because neglecting reporting and accounting for cash flow plays a crucial role, especially when a small business experiences hardship in generating cash as a start up. The next component would be the profit & loss statement which can be used as your performance evaluation. It will show the extend to which the business has been successful in achieving its objectives. It shows the profitability of the company including revenues, expenses, gains, and losses. As a snapshot of the health of a company the profit & loss statement should be viewed regularly.  

 

1LD. Our business lives and dies with cash flow. Make conservative estimates about sales and costs. Know how much it costs to start your small business.  This is no time to be optimistic. Make sure your estimates are based on your experience. While you’re at it, consider the hours you’ll be putting in order to rack up those sales.  Look at your personal budget and make sure you can survive on the projected income for at least six months.   The number one killer of small business is negative cash flow. Don’t become a victim. 

Should small business owners place primary emphasis on cash basis or accrual basis? If so why, If not why not?

 11 Tips to owning a Successful Small Business. Retrieved from  http://wealthpilgrim.com/9-tips-to-owning-a-successful-small-business/

 

1CG. One of the most important financial components to track is the cash-flow report. Some of the other important components are income report as well as the balance sheet. A cash-flow report will advise the shareholders on the amount of cash needed to meet all of their expenses. The income report will let you know how the company is performing over a certain period of time. It allows you compare the company’s performance from month to month or on a quarterly basis. Lastly, a balance sheet helps a company determine whether they are spending too much money in any one area or if they have more expenses than profit. A balance sheet will show how much is being invested in debts, assets, stock, or any other expenses.

 

1KM. The main financial situation that small business owners need to consider is cash flow. They have to consider the current circumstances as well as what is forecasted for the cash. Cash is always going to be tight when a business first opens because cash isn’t flowing into it the way it will when it matures. The different seasons will cause our business to go into slumps. We have to plan for the slumps in business. A small business will have to watch the cash cycles & plan for drops. If they do not keep their cash flow under tight control, they will not survive. They also should consider their ratios. They need to make sure they aren’t highly leveraged. They also need to ensure that their assets are working for them. They can look at their return on their investment & judge whether the business will be profitable.

 

1JK.  A business can appear to be good investment when just comparing the revenues versus the operating cost and the reoccurring expenses, but this can be misleading. Knowing how much money a business takes in and where exactly that cash is going will give one more information on how a business stands financially.  Obtaining the ability to properly read a business’ statement of cash flow will allow one to see where a business is putting their money to help clarify where the money could be better spent. This allows a business to foresee problematic situations that may arise in the future. If there will not be enough liquid money to pay for reoccurring expenses for example labor and utilities because most of the business’ money is either tied up in longterm investments or being wasted by poor financial decisions then it will be documented in the statement of cash flow.  Also a small business will have a hard time surviving if the owner is taking too much money out of the business.The best way for a business to be smart with their money is to track its every move.