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Archives for Accounting

The Three Questions

Every business owner should be prepared to answer at least these three top questions about the financial health of their company.  Every key executive needs to be able to ask critical questions of their CFO.

The three questions to ask:

  • What’s the budget and how is it performing against actual expenditures?
  • How is the company performing operationally? How is it connected to accounting?
  • What’s between profit and EBITDA?

By understanding budgets and their performance, you can keep the company on track and out of the red.

By continually monitoring processes, you can see what is working and what isn’t and make adjustments.  You can see the tie of finances to day-to-day functioning of the company.

And by knowing what is the “meat of the sandwich” between profit and EBITDA, you can see opportunities and pitfalls within your finances as they relate to the company.

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Why should a business owner be concerned with inventory?

If you are selling a product, say online through an outlet like Amazon, you really need to pay attention to inventory.  It has a direct impact on your bottom line and profitability. In keeping track of inventory, you should note:

  • The count.  Even if you only have five SKUs, it pays to keep an accurate count.
  • Where it is.  Is it in the warehouse or in transit?
  • Is something missing? Account for every item.

Cost of goods sold is integral to the conversation around inventory.  There is more to the cost to resell an item than the purchase cost of the item itself.  You also need to at least consider:

  • Shipping in and out of your warehouse.
  • Tariffs.
  • Taxes.
  • Other embedded costs like added items (accessories or replacement parts).

Systems and processes can help you control and manage inventory. An inventory control system like the feature in Quickbooks. Understanding quantity and volume of inventory is critical to controlling costs within your company.

In summary:

  • Have a system in place to account for inventory.
  • Know the cost of goods sold of your product(s).
  • Count everything!

Inventory is important to your consumer products company.  Be aware!


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