Heeeey, It Must Be the Money!

Posted: June 29, 2010 in Entrepreneurship, Finances
Today’s post is inspired by an article in the Wall Street Journal that talks about the importance of keeping track of financials when you are running a small business. The article, “Starting Up and Conquering the Numbers,” is an excerpt from a WSJ publication called: The Complete Small Business Guidebook.

The article accurately points out that many people start a business to support themselves doing what they love. And too often they neglect to focus on the numbers side of the business.

If you want to be successful, you’ll need to ramp up your accounting knowledge. While you can certainly rely on an accountant, bookkeeper, or trusted employee to provide advice on your company’s finances, it’s critical that you gain a comfortable understanding of the numbers. As the owner, you’ll need to make important decisions concerning the purchase of inventory or equipment, expansion into new markets or the hiring of more employees. To do so, you’ll need to have a handle on your company’s finances.

The article tells the story of Wendy Goldstein, who opened up Costume Specialists in 1981, selling custom-made costumes to corporations, schools and theater companies.

After some major setbacks, Ms. Goldstein rolled her sleeves up and got to work.

First priority? Getting to know her company’s finances—something she’d made the mistake of never doing before. At the time, she had an eighteen-year-old college student working part-time on the books. She called him into her office and said, “Okay, I need to know every Friday these three things: how much money we have in the bank, how much people owe me and how much I owe people.” She remembers him laughing and saying, “You mean you want cash flow, accounts receivable and accounts payable.” Her response was: “I don’t care what you call it. I just need to know it!”

It is that simple, and it is that important … when you are running a small business it is amazing how quickly those fees and charges and expenses add up. Good record keeping is absolutely essential, as is always having a clear picture of how fiscally healthy the business is.

For more advice on good financial practices for small business, check out this article on the About.com Entrepreneur’s section.

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