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Measuring your Business Pulse

Posted by administrator on Tuesday, January 26th, 2016
There is life after...hand to mouth!

What's the pulse of your business, if cash flow is the life blood

Most business owners and managers do some financial self-analysis. They may have

ideas about fiscal management of cash, inventory, accounts receivable and accounts payable.

The larger the company, the more important self-analysis and fiscal management become.

Large firms have experts focusing full time on these areas.

It is not uncommon, however, that owners and managers fall short of effectively

managing/understanding these arenas and how to leverage them for greater profitability,

security and survival.

To assist business owners and managers in the key areas of financial self-analysis and

fiscal control we have created the Business Pulse Calculator. You will be happy to know that this

is mostly about common sense absent complicated financial jargon.

Some large and not-so-large complicated accounting packages - while they may have a

lot of data for tax purposes and financial statement preparation – actually hide the heartbeat

(pulse) of your business that you should be following. To that end we have created a simple

spreadsheet approach to assemble some data and track your progress

What Does Business Pulse Measuring Do?

The short answer is that it calculates your working capital at regular intervals. The pulse of your

business is the change in working capital. This periodic snapshot of working capital is distilled

from your basic records.

Working capital is essentially a measurement of liquidity. Liquidity tells you how close you are

from being just hand to mouth, if the trend is up or down and at what pace your company is

losing or making money.

Indirectly - the assembling of the basic information needed to arrive at your working capital –

gets the owner to “consciously” walk through the most crucial pillars of his business. The

business owner or manager that walks regularly though their cash position, inventory, accounts

receivable, accounts payable and debt servicing requirements is the most successful. Like the

old saying goes, the best farm belongs to a farmer that walks through his/her fields regularly.

While much of this exercise is financial and backroom-function related, it prepares the owner to

make good decisions relative to:

1) Effective cash controls

2) What the company’s cash needs really are

3) What Inventory levels to keep

4) How much credit to extend to customers

5) How to best manage payables

6) Good strategies for paying or incurring new debt

7) Demonstrating fiscal and financial astuteness to your bankers

All of the conscious decisions owners and managers make relative to the 7 bullet points above

aid in getting a business beyond the hand-to-mouth paradigm.

Category: Small Business


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