Managing a Business in Times of Recession

inHisbalance · April 21, 2009

In managing a small business through recessionary times, there are three basic exercises:

1.) Maintain or (hopefully) increase revenues.

2.) Maintain and control the Income Statement.

3.) Monitor the Balance Sheet.

The first point is what you do. This is your business. This is your ART.

The next two points are mechanics. There are business procedures involved that allow you to

protect your business. This is where your accountant can make a business-saving difference.

THE INCOME STATEMENT:

The Income Statement measures the revenues against costs and expenses and the "bottom line"

states "this is how much money we made."

In order to effectively manage your business, your Income Statement must be accurate, detailed

and developed in an order to make sense for your business. Once this is done, you can have detailed

period-to-period comparative analysis. As you review the line-by-line differences from period to period,

you can identify trends or variances that may go unnoticed without this tool and exercise.

Managing your Income Statement, in most cases, is managing your expenses. With a period-to-period,

detailed comparative statement, you can identify upward trends in expenses and investigate the "why."

You may even see an item and ask the simple question "what is this item and why do we need it?"

If you do not have detailed, accurate Income Statements and do not do detailed comparative analysis,

I expect you are incurring at least 10% more in expenses than you should be. Cost-cutting is best controlled

through an intelligent review process and can be detrimental if not approached through a good data base.

I can give you the tools and financial expertise to accomplish the operational achievements you want and help your company thrive.

TOMORROW: THE BALANCE SHEET.

Thanks,

Jim

"The Paulding Financial Graybeard"

Let's start a discussion on managing small businesses through difficult times.

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