Accounting For Dummies, 6th Edition

Chapter 15

Ten Tips for Managers

IN THIS CHAPTER

Getting a grip on profit analytics and cash flow

Taking charge of your business’s accounting policies

Using sensible budgeting techniques

Getting the accounting information you need

Being a pro as you talk about your financial statements

Financially speaking, business managers have four essential jobs:

• Scoring adequate capital from debt and equity sources
• Earning adequate profit on that capital
• Expediting cash flow from that profit
• Controlling the solvency of the business

How can accounting help make you a better business manager? That’s the bottom-line question, and the bottom line is the best place to start. Accounting provides the financial information you need for making good profit decisions — and it stops you from plunging ahead with gut-level decisions that feel right but don’t hold water after due-diligence analysis. Accounting also provides the cash flow and financial condition information you need. But in order for accounting information to do all these things, you have to understand and know how to interpret it.

Reach Breakeven and Then Rake in Profit

Virtually every business has fixed expenses. These are operating costs that are locked in for the year and remain the same whether annual sales are at 100 percent or below half your capacity. Fixed expenses are a dead weight on a business. To make profit, you first have to get over your fixed-costs hurdle. How do you do this? Obviously, you have to make sales. Each ...