Larry runs a marketing company in a suburb of Chicago. He’s had a lot of success over the past year, but you’d never know it from what was happening with his bank account. It seemed that whenever he sat down to write payroll checks or pay vendors he always came up short and often couldn’t afford to cash his own paycheck.
When Larry first called me, he had just bounced a couple of checks to key vendors, and was very concerned about cash flow. He seemed anxious to get this problem solved as quickly as possible.
I asked him for a recent set of financials including a Profit and Loss Statement, and a copy of his General Ledger. He said that this would be no problem, since he was keeping everything on quickbooks.
When I got the reports, nothing seemed to make sense. When I dug a little deeper, it seemed that a lot of errors had been made. Entries were categorized incorrectly, there were deposits missing and no one had reconciled the bank account in months.
Instead of using a bookkeeper, he’d asked his assistant to do the bookkeeping, who knows little about it. Unfortunately, Larry attemps to save money backfired on him.
Luckily, the situation was salvageable. With some effort, we were able to straighten things out. When we did we were able to start analyzing his finances.
We looked at his sales, overhead, and cogs. We found out that he was losing money and that he lacked enough working capital to do the amount of business he currently had in house.
From there, we created a budget and projections for the coming year. We determined where to cut costs, and learned how much more in sales he needed to do to become profitable.
Once we did this, we could focus on getting there. A year later, Larry’s business is showing a profit and he’s taking home more money every week.
When armed with the correct financial information, great things can happen.
How accurate are your financial records?
-Susan Martin, NYC Business Coach
r
