Tuesday, August 27, 2013

I am not a numbers person

I was reading an interesting column in the New York Times recently which offered advice on whether a small business owner should sell her business.  Jay Goltz owns five businesses in the Chicago area and blogs for the New York Times.  The woman had  borrowed money from relatives to buy her business and was worried that she wasn't going to be able to pay them back.  Jay was able to work through the finances with her and determine that she should be able to keep going and paying the family back was not going to be a problem.

Why didn't she realize this herself?  She wasn't doing her accounting.  She was relying on an accountant to do her taxes, but she really didn't know how her business was doing in between visits to the tax preparer.  Beth and I see this more often than we would like.  As we have said before, accounting is about much more than just having numbers to prepare your taxes.  If this woman had someone helping her review her finances on a regular basis, she would have known that while her cash flow was a little tight, she was profitable and the cash flow was adequate to cover her expenses, taxes and loan repayment. 

It so so important for all business owners to understand not only the profitability of their company, but the capital structure and cash flow as well.   A profitable business can run into problems with cash flow which can sink them.  Having too much debt or slow moving inventory can result in cash flow problems.  While it is not necessary for a business owner to be able to read financials themselves, it is necessary for them to deal with the results so getting help interpreting them is crucial to the survival of a small business.

Many people aren't familiar with or comfortable with reading financial statements but this is something that can be learned. We try to review the financials with our clients every time we meet with them so they understand what the numbers are saying.  It is always fun to see how much more they understand each time we meet.  The time spent reviewing financials is often brief, but the small business owners we work with always feel better after our session is complete.

Tuesday, August 20, 2013

Things I am not good at

I was just reading a blog with ideas for writing a blog.  As any of you who write blogs know, the hardest thing about writing a blog is finding ideas.  The article claimed to have 93 business blogging topic ideas.  It didn't really, but it had some topics to get a writer started, at least.

One suggestion was to write about something you are not good at which I thought was interesting. I am not good at reading tax codes-they give me a headache and this is why I am a managerial accountant, not a tax accountant.  I am not very good with technology issues so I wish we had an IT department.  I am not good with insects or rodents.  We had a mouse in our house a few years ago and I actually jumped up on a chair and screamed when I saw it, to my chagrin.  I like to follow the rules and to maintain order although I am trying to learn to be more flexible.

One thing I have learned as I have matured is that it is ok to admit when you don't know something or you were mistaken about something.  One thing I have not learned is how to forgive myself when I make an error.  When someone else makes a mistake, I always reassure them that it is ok and I generally am sincere when I say it.  Most of the people I know are hard working and conscientious and any mistakes are not due to carelessness.  I would say the same is true of myself, but I just really struggle when I do make a mistake.  I worry about it endlessly instead of just looking to see if anything needs to be done to correct it and if anything can be done in the future to prevent a similar error. 

Any suggestions on how to get over your own mistakes?

Monday, August 12, 2013

Disaster recovery plans

We had quite the storm in northeast Wisconsin last week!  The weather service has now determined there were five tornadoes which struck various parts of our region resulting in an estimated $15-20 million dollars in damage.  Beth and I were without power from 12:45 am on Wednesday morning until 10:30am Thursday morning.  We were both fortunate to have generators so no loss of food and we were able to keep our cell phones and laptops charged.  No internet access, but we were able to keep up with email via our cell phones.  We worked Wednesday afternoon at a local coffee shop along with many other small business owners looking for power and internet access.  We are lucky to have two really nice spots in downtown Appleton which offer plenty of space, light and internet access as well as good food and drinks. 

This storm got everyone thinking about how to deal with disasters such as this.  Businesses like ours, which doesn't require a physical location, were able to get up and running quickly by relocating to gain access to power and internet.  Businesses with a store front were not so lucky.  Some had emergency generators and so were able to open on at least a limited basis.  Most of the grocery stores in our area were open and able to sell the basics but they all lost the products in the freezer sections.  One of my favorite gas stations was without power and lost out on all the gasoline and coffee sales their competitors enjoyed during the 34+ hours the area was without power.  Hopefully they had business interruption insurance.

The federal government has templates for businesses and communities to use to create disaster recovery plans.  The templates walk you through what things you need to think about, what contacts you need to be able to access quickly (insurance agents, power company, key employees, key customers).  The people in our area who contacted the tree removal experts before they even opened jumped the line and were able to get their homes or businesses cleared more quickly than those who waited until later in the day.

Here is a link to a disaster recovery plan template: http://eden.lsu.edu/EDENCourses/Pandemic/Documents/sampleplan.pdf

I recommend all small business owners create a plan of their own to make sure they mitigate the losses that can occur thanks to mother nature!