As a small business owner, you will know about Profit & Loss Statements and Balance Sheets.
They tell you about your business profitability and net assets. You can see, from one period to another, whether you are making more profits than before, or less. They are the start to giving you information about the performance of your business, and hopefully leading you to create strategies to improve profitability and to increase wealth.
However, they have their limitations. For a start, they are historic. They give you the bigger picture, but unless you analyse them, they fail to break it down into the component parts.
Where is the profit coming from, or where is it not? How solvent are you and what's up ahead?
That's why it's important to dig deeper and put some attention to key financial ratios.
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Get To Know Your Numbers
I always tell my small business clients that they can't afford to "leave the numbers to their accountants."
Most people start their business to achieve a great goal, whether that be to serve their customers well, or to build a great product, or even just to do something they love while finding a way to enjoy life and spend time with family.
So it's not surprising that small business owners with no formal training in accounting think that they can leave the numbers to their accountant.
But you can't really, and this is why.
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Managing Cashflow & Working Capital During Covid
Australia seems to have coped with the economic effects of Covid better than some other countries, but small businesses will still have a long haul to get back to where they were.
This is especially true of some industries like the hospitality and tourism industries which suffer from a lack of demand, and the agricultural industries suffering from lack of supply (labour).
Other industries may have fared better and are probably starting to look at new strategies and even opportunistically looking at merging or acquisition of another business.
Whatever their situation there will soon be a need for more capital in Australian small businesses, and the need to manage cash flow and working capital.
In this blog post, I will look at short-term cash and liquidity initiatives as well as cash flow forecasting.
But before we start, I'd like to invite you to take a look at our revamped website at otsmanagement.com.au where we have clarified our focus on our two areas of service.
Please take a look and explore our special focus areas of Small Business Advisory services and Managing Indigenous Organisations. We specialise in only these two client sectors and we invite you to take a look at what we...
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10 Tips to Avoid Insolvency
It is a tough world out there for small business at the moment. Interest rates are bottoming out yet not much consumer spending is being seen. Here in Perth, iconic restaurants and pubs are closing down, strip shops are empty, fashion labels are rationalising their stores and outlets.
While we cannot succumb to all this bad news, and we must look forward to our continued success in business, nevertheless you cannot simply ignore what's going on. No matter how many times you visualise success, if you don't do something tangible, those problems are going to come and get you. (more…)...
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