When I started my first business I had a basic understanding of finance, but was a lot more familiar with the products, service, support and sales effort required to get the business off the ground. I had a couple of uncles who owned small businesses, so I asked them about how to get started with a basic accounting system. Back then, personal computers were just starting to be used and small business owners had to do a lot of things manually. They drilled into me that your revenues always had to be higher than expenses. They showed me how to keep a basic paper based system maintaining a checkbook and manually tracking each job (The company was in distribution, so it was easy to figure out how to sell products for more than I bought them!).
This manual system worked well in the beginning – Get a quote for a job from a manufacturer and sell it for more than I bought it for. When the bill came in from the manufacturer, I’d write a check to pay for the product and invoice the customer. When we got paid, I record the receipt. As the business grew, I realized I had to look for a system to automate this process. This is where I first figured out that the system should be able to provide me with wide range of reports and information that I could use to understand the business. Information like – How much money was I making; Which customers were the most profitable; How long did it take for customers to pay. Obviously, this list could go on forever, but I also learned that there were financial ratios that were important to track as they were a guide to our financial health.
While I spent far more time than I had planned to get to know and understand the financial aspects of my business, I was thankful that I did. It gave me a base of understanding required to successfully manage the finances of the business. Today, many business owners and managers rely on both inside and outside resources to perform the daily accounting tasks required to keep the business moving forward. Few spend time understanding cash flow, days cash on hand, and other performance metrics because of a lack of understanding, time constraints or tools that will deliver this information in a simple easy to use format.
At expex, we believe that if owners and managers were better able to visualize, understand and act on financial information, they would become more successful. We’ll be writing about a host of tools and services that can provide our readers with simple, easy to use applications that will assist in your endeavor to become more financially savvy. While it’s still finance (Yawn!), we think you’ll find it easy and fun to get a better handle on the details that are most important to you to help you run your business.