BEST PRACTICES: 1 & 2 Go Hand-in-Hand
Having a reference book on Financial Statements is great for both a new and experienced business owners, finding a good reading book that is truly helpful to your business, is a whole separate thing.
We’ve been recommending this book for more than 10 years: Understanding YOUR Financial Statements by Jim Schell. Why do we recommend it? It’s short, to the point, and not written by an accountant or bookkeeper but rather by a businessman.
Schell is fresh and down-to-earth explaining financial definitions that bankers like to toss around. He’s helpful giving insight into developing your own financial statements, and how and when to review them. Best of all, the book gives great tips on how to apply the number column information to your business. It’s helpful not just for preparing taxes and getting loans, but it’s solid information on how to determine where you’re making money and where you’re losing money. AND!!!! better yet — it’s only 75 pages long, easy to flip through to find exactly what you need. While you may read many longer, more in depth books in your business owner life, this is one that you’ll keep handy and refer back to often.
One of the big points Schell drives home, is that being a business owner is often isolating and when it comes to finances no business owner should be alone. There are a few key people that can be excellent advisers including your banker and your CPA. Commit yourself to sitting down with them several times a year to look at your financial statements. Schell suggests that after you pay those June 15 Quarterly Taxes, make an appointment to review the first half of the year with your banker or CPA. That quick review of your numbers, can help tune up a problem that is a mini-snowball now, but could become an avalanche by the end of the year. It’s also the perfect time to get some insight on any major purchases or repairs that would require a big capital outlay.
So, Best Practice #1: Read the book Understanding YOUR Financial Statements, and keep it handy, it’s a useful reference.
Best Practice #2: Make a commitment to review your financial statements halfway through the year with your banker or CPA.
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