Every business owner should work to ensure customers are paying invoices in a timely manner. Slow-paying customers can cause serious cash flow problems for any business, so it’s crucial to analyze how customer payment habits are affecting your company’s growth. To do this, you can calculate your average collection period ratio. A company’s average collection […]
There are many calculations and metrics that can provide valuable insight into your business operations and financials. One metric, the Accounts Receivable Turnover ratio, it’s useful to track how efficiently you collect debts from customers to whom you have extended credit. Too many late or delinquent payments negatively impact cash flow. Here’s what business owners […]
A company’s financial health is calculated using several different metrics. One is the Times Interest Earned (TIE) ratio, also called the Interest Coverage Ratio. Most companies need to borrow money occasionally to maintain or expand their business. However, if a company can’t meet its debt obligations, it could go bankrupt. The TIE ratio is a […]
Running a business requires a solid understanding of basic financial terms and equations. You can use this financial knowledge to better understand how your company operates and ensure you track your finances correctly. This short article defines and details the formula for the weighted average cost of capital (WACC). This formula may seem confusing at […]
Net profit margin is one of many ways to measure the success and growth of your business over time. Your business’s net profit margin can inform decisions related to the profitability of your business, but it can’t tell you everything. Read on to learn more about net profit margin, calculating it, and how it can […]
A return on equity (ROE) ratio measures the profitability of a business. To calculate the return on equity, business owners must divide the net income by the shareholder’s equity. Shareholder’s equity is a business’ gross assets minus liabilities. ROE is an essential metric for business owners because it allows you to gauge your profit levels. […]
Opportunity cost is a popular term not only in the business and financial realm, but in everyday conversation as well. These costs refer to what you sacrifice when you choose one option over other alternatives, however since this term is used so often and generally, it’s important to understand how you calculate opportunity cost, including […]
You want to grow your business, but you’re finding it difficult to get the cash flow that you need. You’ve tried asking for a loan or getting an additional credit card, but the banks say you don’t have enough collateral or enough credit history. What do you do? Invoice factoring can be a solution to […]
When you’re running a business, there are many things to keep records of. There are expenses, taxes, and payroll, to name a few. One essential thing to track is your free cash flow, or FCF. It may seem daunting, but this article will detail what free cash flow is and how to calculate it. What […]
Making a profit and loss statement (P&L) is one of the most important things you can do for your business—in fact, it’s one of the three essential financial statements. This document tells you how much money your company has made and lost over a specific time. It can also provide insights into your business’s financial […]
Business owners and project managers use tools like discounted cash flows in the payback period to make fiscally responsible investment decisions. You can determine whether a proposed project is viable with this formula since this formula compares the initial costs involved with the financial returns you can expect to receive. In this article, you will […]
If you’re a first-time small business owner, you’re probably getting hit with financial terms like “net cash flow” that would make the average person want to run for the hills. However, it is important to stay informed to help your business remain afloat. Understanding bankruptcy, profit and loss and everything in between – financial literacy […]
There’s a reason a balance sheet is considered one of the three essential financial statements. By making a balance sheet, business owners get an inside look into how your business is performing, thus providing a guide to make more informed decisions moving forward. Every business owner needs to know how to make a balance sheet. […]
It’s the end of the year, which means it’s time to dust off your year-end accounting checklist and get to ticking off the boxes. If you’re a new business owner and you don’t have a background in bookkeeping, you may think of this as standard, monotonous housekeeping, but it’s a crucial process for business owners […]
Business owners often only get paid when their clients pay, which can be inconvenient due to long payment terms, past due invoices, and forgetful clients. If you’re finding that your invoices aren’t getting paid on time, you’re not alone. One Quickbooks study showed that 56% of small business owners are owned money from unpaid invoices, […]
You’ve been working hard for months, maybe even years, to build your business and take good care of your customers. But regardless of how committed you are to fostering these relationships, it’s not uncommon for them to fail to abide by payment terms and allow invoices to become overdue. You may then be left wondering […]
As a new business owner, learning different invoice payment terms before setting up your invoicing system is crucial. You don’t want to sign a contract with a supplier or buyer without knowing all of your payment term options, because you might be missing out on terms that are more suitable for both your business and […]
Performing a cash flow audit is an essential responsibility that every business owner should have on their year-end accounting checklist. Auditing a cash flow statement can show how your accounts receivable, inventory, and accounts payable line up yearly. By analyzing these trends, you’ll be better prepared to help your business grow. Falling behind on auditing […]
Like it or not, budgeting is one of the most crucial aspects of running a successful business of any size. Your monthly budget—and the in-depth analysis it entails—gives you all the information you need about the money your business brings in and where it’s going. Tracking your cash flow is especially important if you have […]
If your company operates in the retail industry or provides a product or service, you’ll need to know how effective your collections efforts are during the year. There is a method for determining this information: your accounts receivable turnover ratio. It may sound complicated, but calculating this ratio is pretty simple. This is something every […]
Accounts Payable (AP) is a staple of accounting, as managing your payable properly goes a long way to ensuring overall bookkeeping organization. AP management refers to the process of recording liability amounts in a record book, verifying expenses owed to a specific party, processing payment for those expenses, and documenting all payments. AP is a […]
Proper account receivables management is among the key secrets to a thriving business. It helps the management identify and fix potential cash flow problems, conversely facilitating smooth-sailing operations. An excellent way to stay on top of account receivables is through an aging schedule. From what it is to why it’s of the essence, below is […]
As a business owner, managing cash is a tedious but necessary part of the job. Keeping a hold of your cash flow is critical for a thriving, successful business, but it’s not always the simplest task or the easiest to understand. Two terms often thrown around in the realm of business management are ‘cash budget’ […]
It’s easy to get lost in the pile when it comes to tracking invoices and remembering how much money your customers owe you after providing them with your services. If you don’t keep a close eye on this aspect of your business finances, you may lose money, and your business could suffer the consequences. That’s […]
When you’re running a small business, you must know several formulas to keep expenses low and maintain high-profit margins. Other formulas present business owners opportunities to know how fast their inventory is selling and tracking cash flow, called the cash conversion cycle (CCC). It’s also known as the net operating cycle. Read on to find […]
Running a small business is no easy feat, but running a successful small business takes even more time and skill. Performing a cash flow analysis and looking at your expenses can be the difference between your business floating or sinking. Knowing the financial health of your company helps you identify what you’re doing right and […]
Proper cash flow management is the key to success for many small business owners. Unfortunately, small businesses that do not practice effective cash flow management strategies tend to fail quickly. It’s not uncommon for young businesses to suffer from cash flow problems; in fact, it’s the norm. However, business owners need to focus on minimizing […]
Because the invoice factoring process is so unique in business financing, recording invoice factoring transactions can seem complicated at first. Before recording factored invoices, business owners and stakeholders need to fully understand how the process works along with the ins and outs outlined in the factoring agreement. You might be surprised at how simple factoring […]
The cash ratio, also known as the cash asset ratio, is a liquidity measurement used by financial analysts. Its purpose is to evaluate a company’s capability to pay off any short-term debts. This capability is determined by calculating the ratio of the short-term assets against a company’s short-term liabilities. There are two other common ratios: […]
An organization’s net working capital paints a picture of its overall financial health and, if sufficient, ensures it has enough funds to maintain operations without concern. But for business owners, analyzing working capital involves more than just knowing its definition and how to calculate it; the process involves meticulous tracking and managing so you understand […]
Every business owner needs to have a good understanding of the three essential financial documents: profit and loss statement, balance sheet, and cash flow statement. A profit and loss statement details income and expenses over a certain period, and a balance sheet details your assets and liabilities, but what exactly is a cash flow statement? […]
Your business is running; you’re making sales; inventory is turning over, but are you making a profit? There are many costs involved in running a business, from salaries to rent to insurance to payroll, and even more so in the early days of a new company when the investments typically surpass the initial sales. It […]
There are few more important financial metrics for business owners than the three liquidity ratios: the quick ratio, cash ratio, and current ratio. Studies show that 50% of small businesses have fewer than 15 cash buffer days, a worrying statistic given these businesses are at great risk of failing if financial challenges are to arise. […]
When it comes to figuring your ability to secure funding for your business, you need to have a clear idea of your financial situation. There are many ways to do this. You must start by gathering all your financial data. You can then use several formulas to assess your current standings. One of those formulas […]
When you start a new business, one of the first tasks you have to learn is how sales invoicing works. Choosing the right type of transaction for your business helps you get paid on time and avoid delays in cash flow. One example of a commonly used transaction is cash on delivery (COD). Let’s take […]
As a small business owner, keeping up with finances can be a challenge, especially as your business grows and accounting gets increasingly complicated. But the importance of business accounting means you can’t just find a makeshift solution. Instead, the best business owners master the art of accounting. And for many, it’s mastered with the help […]
