I recently had someone tell me that after receiving their tax information back from the accountant, they realized that they need to have a better understanding of the financial side of the business. This is a fairly common theme this time of year. Perhaps you received the news that you owe some tax to the IRS because you made a profit, yet you don’t have the cash to actually be able to write that check. How can this be?
There are a number of reasons why this could happen and many business owners don’t truly understand all of the financial relationships that take place. The income statement is fairly familiar to most as it tells you whether or not you made a profit, but the balance sheet is typically not as well understood (if they even know what that is), yet it is on the balance sheet that cash is managed. And we pay bills with cash, not profit! Do you have money tied up in accounts receivable, excess inventory, have loan principal payments to make, is debt structured properly, and so on? All of these could be part of the answer.
Until September of 2012, Wyoming Entrepreneur – Small Business Development Center has made available to every business in Wyoming a program called Profit Mastery. It is FREE, and is a great resource to help business owners obtain a better understanding of the financial side of their business. To learn more about this program visit our web site at www.wyen.biz and click on the Profit Mastery button at the bottom of the home page. This is an on-line course that you can take at your convenience, with great tools to assist you in implementing the concepts in your own business. If you have questions about the program, contact the Wyoming Small Business Development Center office in your area, or call 1-800-348-5194.