At the recently concluded 2008-2009 Small Business Success Series, Keith Upkes of Camas-based The Upkes Group presented information on using financial statements as a tool to manage company. A contract controller for many small businesses in the region, Upkes said many clients have little idea how to use the information available to them in their accounting systems.
Upkes made these suggestions about what to look at and why:
- The balance sheet: The best tool for a business to manage cash
- The profit and loss statement: The best tool to manage profit
- Cash flow forecast: The best tool to forecast cash needs and potential shortfalls in the future
- Key performance measures (specific metrics unique to the business): The best tool to understand business-specific indicators
Another effective tool is the break-even calculation. Knowing the total sales necessary to break even is critical to business management.
Dividing fixed costs by the gross margin of the product (being produced and sold) results in the sales dollar volume needed to break even.
When is the last time you ran the calculation?
