Counting #2 Counting Money

Ben Franklin, on a hundred dollar bill, smiles, having recieved a kiss on the forehead

This time let’s focus on the Counting of Money.

A most valuable tool is the Profit and Loss statement. Based on a useful myth the P & L pretends that two things are true.

  1. All money owed to the company has been collected.
  2. All money owed by the company has been paid.

In that regard, P & L’s are never completely correct. However, they are very useful tools because they can determine.

  1. Revenue status, often, divided by profit centers.
  2. Cost of sales expense, often, divided by profit centers.
  3. General overhead, costs that cannot be allocated to specific jobs or sales activities.

Revenue minus Cost Of Sale equals the Gross Margin and tells us if the fee we charge for the work we do is enough. It is also a strong indicator of company productivity and when accompanied by percentage indicators (all off of total revenue) can quickly tell us the areas to focus on for positive change.

Gross Margin minus General Overhead costs indicates Net Profit and Net Profit is the money we use to pay expenses on the Balance Sheet.

A word about attitudes toward profit: It used to be that owners viewed profit as “the money the government taxed”. It was the advice of many accountants to manipulate the figures to show a loss and therefore avoid taxes. The problem with that old view and practice is that those who do so find it difficult to get lines of credit from banks or suppliers. Perhaps most importantly there is no clear focus on the real measure of the company’s success or failure to perform.

I am constantly amazed how many small to medium businesses do not have timely monthly P & L’s. To a lesser degree, how many companies with monthly P & L’s do not review them with the management team on a consistent basis.

How can you see where the rocks or open seas are if you don’t check your position?

Other financial measurement tools of important value are:

  • Accounts Receivable Ageing Report – Who owes you money and for the longest time.
  • Accounts Payable Ageing Report – Who do you owe and for how long?
  • Cash flow projections– When is money coming in and when will it be going out?
  • Balance sheet – What is the Changing Status of long-term debt, receivables, payables and inventory?
  • Job Costing – What is the gross margin dollar and percentage amount of the most recent work we have done?

Timeliness, Accuracy and Active Review of the financial status of your company are among the most important counting you can do.

Next – Measuring Marketing

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Focus on your strengths and life is better!!

 

It naturally follows that because last time I focused on Marcus Buckingham’s book “First, Break all the Rules” I should this month focus on Buckingham’s “Now, Discover Your Strengths”.

And I will.

Of all the tools I use to help those in organizations, for and not for profit, this book and the test are the most useful.

From the introduction, “Guided by the belief that good is the opposite of bad, mankind has for centuries pursued it’s fixation with fault and failing. Doctors have studied disease in order to learn about health. Psychologists have investigated sadness in order to learn about joy. Therapists have looked into the causes of divorce in order to learn about happy marriage. And in schools and the workplaces around the world, each one of us has been encouraged to identify, analyze, and correct our weaknesses to become strong.

This advice is well intended but misguided. Faults and failings deserve study, but they reveal little about strengths. Strengths have their own patterns.”

This focus on strengths is the result of over thirty years of study from the Gallup Organization and involved over two million interviews.

The result is this excellent tool.

In order to use this tool it is helpful to understand some of the patterns of strengths and that is what Buckingham does in this book’s fine linear organization. Each chapter is a building block leading us to the test and the application of managing those with clearly defined strengths.

From looking at “The Anatomy of a Strength” to “Discovering the Source of Your Strengths” and through “Put Strengths to Work” this excellent book leads us to a revolutionary approach to helping people get better at what they do.

And it’s entertaining, with wonderfully illustrative references to, Tiger Woods, Bill Gates, Cole Porter, The Investor, The Director, The Skin Doctor and The Editor to mention a few.

Gallop has identified thirty-four strengths and has provided a test where a person can identify their five top strengths.

You buy the book and in the dustcover’s spine is a series of letters and numbers which are a key you can use to take the test on the internet.

Chapter four identifies each strength with a descriptive paragraph and follows with clarifying examples which show what that strength “Sounds Like”.

For those of us dedicated to helping the leadership team of a company become more effective the strongest tool in the book begins on page 176 the second part of Chapter 6 “Managing Strengths” .  This powerful section is called ‘One by One’ and what it does is to answer the question, “How do I manage a person strong in … (one of the 34)?”

Wow! Practical, useful and it works.

If you are or know a person who would like to improve in helping others this is a wonderful book.

In fact, if you discover your five strengths you could learn how to better manage yourself.

What a concept.

Here are my five top strengths.

  • Maximizer
  • Strategic
  • WOO
  • Self-Assurance
  • Ideation

I took the test again last year.. some three years later and this time my top five strengths are:

  • Maximizer
  • Strategic
  • Learner
  • Arranger
  • Positivity

Things can change in a short amount of time.. but then again some things stay the same.

If you read this book you might learn how to better manage me.

 

 

 

 

 

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