Sunday, October 10, 2010

Have you passed the acid test lately?

Attn: Small Business Entrepreneurs.  
When was the last time you truly looked at your balance sheet?
In many small, privately held businesses the words ‘profit’ and ‘cash’ are used daily, but the balance sheet tends to be the forgotten cousin of the financial statements.  Small business owners ask about the balance sheet so little that their accounting teams  can easily neglect analyzing it for long periods of time.  The problem is that when your business runs into a cashflow crisis, the balance sheet is a critical component to successfully securing loans.

To avoid the fallout of learning too late that your balance sheet doesn’t support another lease or loan, ask your head of accounting to give you a report on your balance sheet. Even if you think you already know, it can’t hurt to clarify for certainty.  All you have to do is ask your head of accounting these three simple questions:

1. How does our balance sheet look today? 

2. How does our balance sheet compare to others in our industry (competitors)?

3. What are 3 best things we can do to improve our balance sheet?

These three simple questions will get your team focused on providing you with constructive feedback and recommendations that will benefit your business.

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