Obsolete Inventory

Not all inventory sells or makes it to the production line. Plans and markets change and that means some inventory items become obsolete. Dealing with obsolete items properly improves the accuracy of accounting related metrics and ratios. But more important to CEO's and business owners handling obsolete inventory effectively can actually improve efficiency and production while increasing the health of the balance sheet.

The Connection (between balance sheet and income statement)

The balance sheet measures the financial condition of a business at a distinct point in time where the income statement reports financial performance over a period of time. The short video explains the difference between the two and how they are tied together.

Cost of Goods Sold (COGS)

Many business execs have a difficult time understanding why their COGS number differs, often time significantly, from their purchases for the month. What is missing many times is a knowledge of how COGS is calculated when beginning and ending inventory are taken into account.

Bad Debt

There are two methods for accounting for bad debt. One is based on when accounts receivable balances are written off and the other is based on an estimate of historically bad balances. Knowing which one your company is using and how the pool of bad debts is being carried on the balance sheet is important if you want accurate information on sales and receivables.

Inventory Turnover

Increasing inventory turnover holds the promise of doing more with less. There are two levers businesses can pull to increase inventory turnover, increasing sales or decreasing inventory carry cost. Both yield significant benefits to gross profit. If you've heard of inventory turnover but didn't quite understand what it meant this short video breaks it down.

LIFO

Accounting for inventory has been getting some attention in the press lately. The LIFO method is often not understood and CEO's would do well to know why their particular inventory method was chosen and what effect it has on the income statement and the tax return.

Cash Reconciliation

It isn't so important that CEO's and owners understand HOW to do a cash reconciliation as it is WHY. Inside a cash reconciliation there are items that highlight record keeping inefficiencies and cash that is unaccounted for. With a general understanding CEO's can bring a greater degree of accountability to the organization and get closer to real time information they can use in their business.

Depreciation

Most business owners and execs will ignore depreciation expense because it is not a CASH charge. However, if understood correctly depreciation and its counterpart, accumulated depreciation, give business owners and execs insight into the timing of necessary capital expenditures.

EBITDA

EBITDA is an often misunderstood term and those who know what the acronym means often don't know why certain items are added back to net income. This short tutorial explains EBITDA and why the various components are important when it comes to measuring operating performance.

Cash vs. Accrual Accounting

Cash accounting and accrual accounting both need to be understood in their basic forms to give CEO’s an understanding of the difference between profits and cash flow.

The Two Halves of the Income Statement

An income statement can be thought of as having a bottom half and a top half. Strategically this is a much better paradigm than debits and credits. It give CEO’s a way to dissect their organization’s performance into two fundamentally different ways.

The Balance Sheet

Too many business owners don’t understand the balance sheet. That’s because most explanations start with terms like assets, liabilities and equity. I break it down in very simple terms to give you a solid foundation for just what a balance sheet does and what it means.