Good Morning,
I thought we would change it up a little this week and talk business and finance.
Regardless of whether you are in business, your personal finances, a social club or, as I am currently doing, a home owners association president, this applies.
They all have expenses, and they all require income to pay for those expenses. What has really surprised me throughout my career is the number of business owners who have absolutely no idea about the financial position of their business. As an old accountant friend used to say, "They come to me with a box of bills at tax time and ask if they made any money last year."
There are two critical documents which we all need to understand:
- Income Statement which tells us what money came in and from where, what money went out and to whom with the difference being net income. This needs to be positive or, if negative, we spent more than we brought in.
- Balance Sheet which tells us what we own (assets) what we owe (liabilities) and equity (what we are worth). Owing more than we own usually leads to insolvency.
Financial documents need not be complicated, although, many accountants seem to like to make it seem that way. We need to make sure and, if necessary, demand that they be made that way. Such is a case I am currently working to resolve. We need to, not be intimidated, and ask questions. We are all responsible for the finances of something in our lives. Let's make sure we know and understand our numbers.
Have a great week,
Jim
