fbpx
Unit 11, 61 Flynn St, Wembley, WA, 6014
08 9242 2085

Category Archives: Finance

  • Home
  • Category Archives: "Finance"

When do you start making profits?

When do you start making profits?
One of the key pieces of information for any business is - what is your break-even point? This is the point of sales volume or revenue, that is required to cover all your costs, being both fixed costs as well as variable costs. At this break-even point your total profit is nil. Before you reach that break even point, you will be making losses. After that break even point, you will be making profits. In order to generate sales, you have to incur costs. You need to know how much you must sell in order to break-even. You can get our free break-even point calculator here. It is an Excel spreadsheet that you can use to calculate your break-even point. So, how do you calculate your break-even point? (more…)...
Read more

8 Financial Ratios To Measure Your Business Performance

8 Financial Ratios To Measure Your Business Performance
  As a small business owner, you work hard to make your business a success. You record your financial transactions, and whether you use your own software, or you ask your accountant to prepare them, from time to time you print a financial report and look at your business' financial performance. However, those reports, commonly your Profit & Loss and your Balance Sheet, can only tell you so much about your business. They will give you clear information about the dollars at play, but how is your business performing really, from year to year? That's why it is important to review financial ratios from time to time. Financial ratios are the relationships between key numbers in your accounts. Some financial ratios tell you about the profitability of your business. Others inform you about your liquidity, and yet others will tell you about the efficiency of your financial assets. An example of a financial ratio providing information about your profitability is your Return on Equity, or the rate of return on the investment you have made in your business. If your Return on Equity is 6% and bank interest on an equivalent investment with no risk is 2% you need to ask yourself if the extra 4...
Read more

How non-financially trained people can prepare a budget in 5 easy steps

How non-financially trained people can prepare a budget in 5 easy steps
Preparing a budget is "easy" for an accountant and small business people who have some finance training. However for many it is the stuff of voodoo. But when you break it down, there is no real mystery around the preparation of a budget, it is based on your plans and intentions, costs that you can obtain from suppliers, and some judicious making of assumptions and estimates. In truth, any non-finance executive or business owner can do it if they approach the task logically. Here are 5 basic steps to take to compile your budget. 1. Tell the story of your plan first. A budget is no more than the costing of a story. Is your story one of expansion, or of reduction? Does your story include the need for more staff or capital equipment? Is your story about opening more stores? So the first step is to provide a narrative of your operational plans for the period of the budget, usually a year. If you don't have a business plan, look at your business and ask yourself what you will do within it for the year ahead. List any new initiatives, identify any areas you either want to close or reduce in size, identify your...
Read more

Financial Understanding starts with the Chart of Accounts

Financial Understanding starts with the Chart of Accounts
We are about to discuss accounting matters.
Hey, don't click past, it really is important!
Well yes, a little boring too, but sometimes you need to get into the detail of the boring to get the information you need in order to do all the glamorous stuff like building a vibrant business. In fact often you need to get into details to make sure your product or service delivers its promise. Think of a mechanic - no point creating a culture of caring for the customer if your mechanics fail to bleed the brake valves every time. Or a lawyer who's innovative and really digs deep for the client - not proofreading and the typos will get him every time.
So, one of the crucial (boring) details in any business is the accounting. You can hire a tax accountant at the end of the year; you can hire a once a week book-keeper; you can even employ a full time accounts-person and buy an expensive accounting software system; but the decision about some detail must lie with you and while you should take some of their advice, you need to decide on some key elements of your books.
The one particular aspect I want...
Read more

OTS Management