Speaking of Business: Checklist ensures financial security
Q: I have owned a business for many years and have never set up a check list to review my financials. How can I get the most value out of my financial statements?
A: The real value of financial statements comes when you analyze them to see how your business is doing. You don’t have to know the exact makeup of each item on the balance sheet and income statement, but you must have a sense of what the numbers mean in order to interpret them. The relation of the data to historical data and to other businesses in your industry is what counts.
Below is a checklist of issues you may want to consider while preparing your financial statements:
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” Compare present performance with past performance.
” Look at key business ratios as you compare the condition of your business with that of other similar businesses.
” Consider the impact on the performance picture of inflation and different accounting practices and procedures.
” Project income and construct a cash flow budget to assess production requirements and financing needs.
” Achieve a fair return on investment at a level of risk acceptable to you.
” Maintain working capital at sufficient levels to support operations.
” Maintain a proper balance between current assets and fixed assets.
” Establish and maintain a proper level of capitalization with the best mix of short-term and long-term debt financing and equity financing.
” Examine your fixed and variable costs and relate them to profits.
” Evaluate and project how markets, products, competition and sales effect your profits.
” Establish the contribution margin for your business and for your various product or service lines.
” Establish a break-even point for the business as a first step in determining how changes in sales will affect costs and profits.
” Review the degree of operating leverage in the business and its effects on operating profit and return on equity.
” Consider how growth in sales and profits usually increase the need for financing.
Q: What resources are available from the Federal Government that might help me research and start a business?
A: The Small Business Administration is the federal government’s main provider of business assistance to the small and new business owner. Below is a list of some of the types of counseling that the SBA provides:
” Business initiatives, education and training. A wide range of publications and audio-visual materials geared toward management of a small business and technical assistance are provided. Additionally, there are specific training conferences available for veterans and women who are prospective and established business owners.
” International trade. Guidance to a business in the export trade area is available.
Another agency available to provide useful statistics to new business owners is the Census Bureau. Below are Bureau of the Census publications that may be useful to you. Most libraries have these publications available.
” Catalog of U.S. Census Publications contains a list of all publications with appropriate descriptions.
” Census of Retail Trade lists statistics for more than 100 different types of retail establishments by state, metro area, county and community (population over 2,500).
” Census of Wholesale Trade lists statistics for more than 150 types of wholesaler categories.
” Census of Selected Services is similar to the Census of Retail Trade for retail service organizations such as auto-repair centers and hotels.
” Census of Manufacturers lists statistics for 450 different classes of manufacturing industries. The statistics are compiled by industry and include information on capital expenditures, value added, number of establishments, employment data, material costs, assets, rent and inventories.
” Census of Population lists statistics on the population characteristics of states, counties, standard metropolitan statistical area and census tracts. The demographics that are reported include age, employment income, family composition, level of education, marital status, occupation, race and sex.
” Statistical Abstract of the United States is a source for finding current and historical statistics about various aspects of American life. The publication includes statistics on income, prices, education, population, law enforcement, environmental conditions, local government, labor force, manufacturing and many other topics.
” State and Metropolitan Area Data Book provides statistics on states and metropolitan areas in the United States and on subjects such as area, housing, income, manufacturers, population, retail trade and wholesale trade.
” County and City Data Book provides 144 statistical items for each county and 148 items for cities with a population of 25,000 or more. The information is organized by region, division, state and SMSA for income, banking, capital expenditures, education, employment, housing, manufacturing, population, retail and wholesale sales and other factors.
” County Business Patterns includes a summary of statistics on the number and type (by SIC code) of business establishments as well as their employment and taxable payroll.
Greeley resident Russell Disberger is a founding member of Tekquity Ventures LLC, a Louisville-based specialty venture-capital firm investing in technology development and licensing. He can be reached at (303) 926-3990 or disberger@tekquity.com.
Q: I have owned a business for many years and have never set up a check list to review my financials. How can I get the most value out of my financial statements?
A: The real value of financial statements comes when you analyze them to see how your business is doing. You don’t have to know the exact makeup of each item on the balance sheet and income statement, but you must have a sense of what the numbers mean in order to interpret them. The relation of the data to historical data and to other businesses in your…
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