Understanding your Business Financials?

Posted 20 May 2010

FINANCIAL LITERACY

In the current monetary climate there is more and more focus on making sure you know what your money is up to. With a slower economy (apparently) there is now the focus on even more control on your expenses and how to (market) maximize your income? This is a great time to become more financially literate.

Do you know how to effectively read your Profit & Loss Statement and challenge some of the items on it? Do you do this regularly (a minimum of once per month if not weekly)?

Is your Balance Sheet up to date or is it an item that the Accountant does up and it remains in your tax return for them next year? Do you know what it is for?

Financial literacy is also about knowing how your business structure works and ensuring it matches your long term business and personal goals without you getting caught in capital gains tax or stamp duty penalties. If you don’t know what structure you have and how to benefit from it, now is the time to talk to you financial advisor to learn!

Do you know what your competitors pricing is for the products you stock or service you offer? Are you positioned to take advantage of their challenges? Is your mark-up rate standardised and can be implemented quickly to ensure that you don’t eat into your gross profit?

Financial control is about 1/7^th of the business functions performed and should be treated accordingly. Be informed; be ruthless in your decisions.

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