Accounting for the Numberphobic: A Survival Guide for Small Business Owners PDF
Preview Accounting for the Numberphobic: A Survival Guide for Small Business Owners
ACCOUNTING FOR THE NUMBERPHOBIC This page intentionally left blank Accounting for the Numberphobic A Survival Guide for Small Business Owners DAWN FOTOPULOS American Management Association New York • Atlanta • Brussels • Chicago • Mexico City • San Francisco Shanghai • Tokyo • Toronto • Washington, D. C. Bulk discounts available. For details visit: www.amacombooks.org/go/specialsales Or contact special sales: Phone: 800-250-5308 Email: [email protected] View all the AMACOM titles at: www.amacombooks.org American Management Association: www.amanet.org This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Library of Congress Cataloging-in-Publication Data Fotopulos, Dawn. Accounting for the numberphobic : a survival guide for small business owners / Dawn Fotopulos. pages cm Includes bibliographical references and index. ISBN-13: 978-0-8144-3432-1 ISBN-10: 0-8144-3432-0 1. Small business—Management. 2. Small business—Accounting. 3. Managerial accounting. I. Title. HD62.7.F67 2014 657'.9042—dc23 2014003376 © 2015 Dawn Fotopulos. All rights reserved. Printed in the United States of America. This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019 The scanning, uploading, or distribution of this book via the Internet or any other means without the express permission of the publisher is illegal and punishable by law. Please purchase only authorized electronic editions of this work and do not participate in or encourage piracy of copyrighted materials, electronically or otherwise. Your support of the author’s rights is appreciated. About AMA American Management Association (www.amanet.org) is a world leader in talent develop- ment, advancing the skills of individuals to drive business success. Our mission is to sup- port the goals of individuals and organizations through a complete range of products and services, including classroom and virtual seminars, webcasts, webinars, podcasts, confer- ences, corporate and government solutions, business books and research. AMA’s ap- proach to improving performance combines experiential learning—learning through doing—with opportunities for ongoing professional growth at every step of one’s career journey. Printing number 10 9 8 7 6 5 4 3 2 1 To Katherine, who always found an encouraging word for the struggling American Management Association • www.amanet.org This page intentionally left blank C O N T E N T S Acknowledgments xi Introduction: Why You Need This Book xv 1 Your Financial Dashboard: The Net Income Statement, Cash Flow Statement, and Balance Sheet 1 The Net Income Statement 4 The Cash Flow Statement 9 The Balance Sheet 13 Key Takeaways 16 2 The Net Income Statement: The Key to Growing Your Profits 19 Line Items on Your Net Income Statement 20 Management Benchmarks 38 Key Takeaways 39 vii American Management Association • www.amanet.org viii Contents 3 Using Your Net Income Statement to Improve Profits: Driving with Your Eyes Open 43 Driving Profits for Product Businesses 44 Driving Profits for Service Businesses 59 Key Takeaways 69 4 The Breakeven Point: When Your Business Is Truly Self-Sustaining 71 Why the Breakeven Point Matters 72 How to Discover the Breakeven Point 74 It Takes Time to Reach the Breakeven Point 82 Marketing Expenses Can Help or Hinder 85 Staying At or Above Your Breakeven Point 88 Key Takeaways 89 5 Your Cash Flow Statement Is Speaking: Can You Hear It? 91 Why Cash Flow Is Important 92 Net Revenue and Cash Are Not the Same Thing 93 How the Cash Flow Statement Works 101 Budgeting Cash the Easy Way 105 Cash-Burning Traps to Avoid 109 Key Takeaways 112 6 Managing Your Cash Flow: More Is Better 115 Managing Your Cash Inflow 116 Managing Your Cash Outflow 132 Key Takeaways 135 American Management Association • www.amanet.org Contents ix 7 What’s Your Company Worth? The Balance Sheet Holds the Secret 137 What the Balance Sheet Reveals 138 The Three Sections of the Balance Sheet 142 Key Takeaways 160 8 The Balance Sheet in Action: How to Win Friends and Influence Bankers 163 What the Balance Sheet Numbers Reveal 164 How to Improve Your Balance Sheet 167 How a Bank Evaluates a Business 169 Duration of a Loan and the Role of Collateral 172 Eight Myths About Dealing with Banks 174 Key Takeaways 181 9 Putting It All Together: Your Financial Dashboard in Real Time 183 Basic Business Transactions 185 Ratios and Percentages Help Find the Patterns 197 Key Takeaways 201 10 Numbers Make the Business: An Interview with Norm Brodsky 205 Inside the Mind of Norm Brodsky 206 Key Takeaways 223 Glossary 225 Index 233 About the Author 243 American Management Association • www.amanet.org
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