Do you want to have more financial control of your company? Of course you do, or you wouldn’t be reading my posts. But let’s be clear: this is not an attempt to make you into your own controller. We have people who do that for you. Rather, whether your role is CEO, President, owner/operator, senior executive or advisor, if you have some responsibility for guiding a profit-making enterprise, this is for you.
In fact, this is about the opportunity to assess your company’s financial health as you set goals for the balance of this year and next. The premise: The health of your company today is not determined by last year’s profit or last year’s sales. It’s determined by how well you are positioned to make your assets produce a profit for you today and tomorrow. And that is best determined by looking at those assets themselves, and the related liabilities, to try to predict the kinds of challenges you’ll face as the economy recovers oh, so slowly. In other words, let’s look at your Balance Sheet.
Your company’s balance sheet is that financial report frequently overlooked as CEOs scan ahead to see the bottom line number on the income statement. It’s the report many CEOs only look at when their banker asks questions about it. But there is a wealth of information in that one-pager, a host of opportunities to improve your business, and your future net worth, by reviewing and fixing some of the anomalies that may show up on your balance sheet – anomalies that sooner or later will show up on your income statement and in your bank account. Here is Tip #1, the first of five tips I’ve selected to help you understand the power of this strategy:
Quick Ratio: Your company’s current assets minus inventories divided by current liabilities. Does your Quick Ratio indicate you may have loaned too much money to slow paying customers? If you don’t have $1.50 to $2.00 in current assets for every $1.00 of current liabilities, you may be doing more scrambling for cash than you need to. Speeding up collections is often the simplest and easiest way to raise your cash balance and free up cash for reinvesting in the business. Ask us for our 5 tips for increasing collections without mutually painful arm-twisting or damaging the customer relationship.