‘READING FINANCIAL STATEMENTS’

1.         You, as an entrepreneur, must understand how to read a financial statement because it is the lifeblood of your business.  Please read the chapter on this subject carefully.

2.         Your accountant will assist you in understanding Generally Accepted Accounting Principles (G.A.A.P.) in more detail. Listen to him/her. Also, it would never hurt to take a course in basic accounting.

¨       Virtually all financial statements consist of four separate reports.

1. THE BALANCE SHEET

2. STATEMENT OF EARNINGS (STATEMENT OF INCOME)

3. STATEMENT OF CHANGES IN FINANCIAL POSITION

4. NOTES TO THE FINANCIAL STATEMENTS

¨       FIFTEEN ‘MUSTS’ ENTREPRENEURS NEED TO KNOW ABOUT FINANCIAL STATEMENTS

1.                  The ratio of Current Assets to Current Liabilities should be a ratio of 1:1 or better. 

2.                  The ratio of Equity (the amount you have invested in the company plus the accumulated profits) needs to be in a reasonable proportion to the Debt. 

3.                  The ratio of Accounts Receivable to Sales indicates if receivables are current.

4.                  The ratio of Inventory to Cost of Sales will indicate if inventory is turning over at the proper rate.  Excessive inventory is indicative of bigger problems.

5.                  The ratio of Fixed Assets to Long-term debt will indicate if long-term assets are being financed with long- or short-term debt.

6.                  Cash Flow is defined as the earnings for the year adjusted for non-cash items (e.g. depreciation). Virtually all business must have a positive cash flow.

7.                  Have a Statement of Changes in Financial Position done if there isn't one.  This optional financial statement will indicate the source of cash and where it was spent.

8.                  Watch the Research and Development (R&D) costs. A product or service that is needed as much in the future as it is now, will reduce future R&D expenditures.

9.                  Leasing of equipment such as office equipment, cars, etc. may not be seen on the balance sheet. These leases must be referenced somewhere in the statements.

10.              Examine the company’s depreciation policy. If the asset has a life of 10 years and they write it off in 15 years, they are showing an artificially higher profit.

11.              If start up and Research and Development (R&D) costs are capitalized (i.e. inserted as a part of the assets), they will artificially increase the profits of the company.

12.              Look for hidden assets. Patents, franchises, contracts with customers giving exclusive rights to sell products, etc. These items can have huge hidden value.

13.              Examine the ratio of Capital Assets to Debt. In times of a cash crunch, the equipment portion of the capital asset can be refinanced - a source of quick cash.

14.              Oil & gas, mining, forestry, agriculture, fishing industries’ balance sheets are different from normal ones. Be an expert, or have an expert help you to read them.

15.              The bottom right-hand corner of the balance sheet should show a plus figure.

 ¨       TEN FINANCIAL STATEMENT WARNING SIGNS.

1.      Excessive (or nil) management fees.  Why or why not?

2.      Excessive professional fees.  Why or why not?

3.      Excessive bad debts.  Why?  Bad credit policy?

4.      Loans to shareholders.  Why?  Can they be paid off or ignored?

5.      Off balance sheet financing.  Note buildings or vehicles owned by management.

6.      History of losses.  Why?

7.      Is there an excessive overhead cost?  Why?

8.      Does management have inferior ability?

9.      What credit facilities does the company have?

 10. Cash flow.  ‘When all else fails -- read the directions.’  

Chris Wilkinson.                              

Certified Business Behaviour & Attitudes Analyst.               

Business Coach.

Tel: (905) 275-2907 (Mississauga).

E-mail: buspilot@bell.net

Sample of a corporate family leave policy. (Lawyer reviewed for use in Ontario).

Sometimes, someone we love becomes ill to the point where they are not expected to be around much longer. Someone needs to provide them with care and support during what is likely to be their last months in this world. 

We understand these circumstances and allow you to take up to 8 weeks of unpaid leave in any 26 week period to tend to these types of situations.                                                                                            

The Policy Guideline at XYZ Inc.

 In addition to the days you are entitled to be absent from work due to sickness or personal needs, you may make a request for family medical leave.  This kind of leave will only be granted where a specified family member who has a serious medical condition with a significant risk of death occurring within a period of 26 weeks. Specified family members and relationships are defined as follows:

1.      the employee's spouse (including same-sex spouse) *

2.      a parent, step-parent or foster parent of the employee *

3.      a child, step-child or foster child of the employee or of the employee's spouse *

4.      a brother or sister of the employee *

5.      a grandparent of the employee or of the employee's spouse *

6.      a grandchild of the employee or of the employee's spouse

7.      the father-in-law or mother-in-law of the employee

8.      a brother-in-law or sister-in-law of the employee

9.      a son-in-law or daughter-in-law of the employee or of the employee's spouse

10.  an uncle or aunt of the employee or of the employee's spouse

11.  the nephew or niece of the employee or of the employee's spouse

12.  the spouse of the employee's grandchild, uncle, aunt, nephew or niece

13.  a foster parent of the employee's spouse

14.  a person who considers the employee to be like a family member.  **

*reference to these relationships includes the corresponding "step" relationship.  For example, paragraph 2 above includes a step-grandparent of the employee or of the employee's spouse.

** applies to an employee who takes a family medical leave to provide care or support to "a person who considers the employee to be like a family member" only if the employee, on the employer's request, provides the employer with a copy of the document submitted to the federal government for claiming compassionate care benefits under the Employment Insurance Act (the "Act") in which it is stated that the employee is considered to be like a family member.

The eight weeks does not have to be taken all at once, but cannot be taken in increments of less than one week.

Requests for family medical leave should be submitted in writing to your manager, giving as much notice as possible.  A medical certificate must be produced to support the leave request (ideally in advance, or as soon as possible thereafter).

Intended for guidance/education purposes only. Before using, review with your legal advisors to determine its applicability to you own unique situation.

Chris Wilkinson                

Certified Business Behaviour & Attitudes Analyst.

Business Coach.

Tel: (905) 275-2907 (Mississauga).

E-mail: buspilot@bell.net

How to handle the most common sales objection:.......

 Stall/Deferred Decision: "I Need To Think It Over"

Probably the most common form of objection is resistance to making a decision. The prospect says something like: "I need to think it over," or "Let me look through the literature one more time and get back to you." This tells you that the prospect does not have any specific objection. He merely feels a need to slow down and be thorough. The risk here is that while the prospect is thinking about it, he will begin to forget all of the advantages. The longer he thinks about it, the greater the likelihood that he will turn his attention to something else and forget all about you and your products.
When you hear this objection, your best response is an offer to help the prospect think it over:

Customer: I need to give this some thought before I decide.

 

Salesperson: That makes a lot of sense. Your advertising is important and you want to make sure the decision you reach is good for your business. What factors are you going to consider as part of your decision?

This salesperson's strategy is to get the prospect to voice the issues which remain unresolved. Either of two things are likely to happen. One is that the prospect will realize there is nothing else to think about. The second is that the prospect will raise new questions that the sales person can assist in answering.

Chris Wilkinson.                              

Certified Business Behaviour & Attitudes Analyst.               

Business Coach.

Tel: (905) 275-2907 (Mississauga).

E-mail: buspilot@bell.net

Have you made a recent SWOT analysis of your business?…….

Here are some headings that may be helpful. Strengths and weaknesses are INTERNAL. Opportunities and threats are EXTERNAL.

STRENGTHS

Strong selling system	Total Quality Management
Strong marketing skills	Great location
Strong financial position	Strong MIS
Proprietary products and or services	Talented or highly creative employees
Patents	Various professional skills
ISO 9000	Various service skills
Various manufacturing skills	Customer base

NOTE:  Hard working and dedicated staff is great but should not be listed as strength.  A strength is one from which synergy can be created.  The strength should be one that is not nebulous but one that can be measured or quantified.

WEAKNESSES	OPPORTUNITIES
Poor selling culture	Interest rate fluctuations
Poor marketing skills	Unemployment fluctuations
Poor financial position	Easy entry into a business
No proprietary products and or services	Product substitution
Non ISO 9000	Housing starts
Weak MIS	Population shifts
Poor location	Population age shifts
Lack of various or key skills	Industry correlation change
Non creative employees No TQM	Technology changes that will create a new product or service

THREATS

Technology changes that will obsolete your product or service

Interest rate fluctuations

Unemployment fluctuations

Easy entry for competitor

Product substitution

Housing starts

Population shifts

Population age shifts

Product becoming a commodity

Industry correlation change

Chris Wilkinson.                              

Certified Business Behaviour & Attitudes Analyst.               

Business Coach.

Tel: (905) 275-2907 (Mississauga).

E-mail: buspilot@bell.net