11 Keys to Great Success in Life and Business: Key #9 Understand Accounting and Finance

Let me apologize to you right up front… This article isn’t the typical “dream big” stuff I enjoy writing about. But the truth is, if you don’t understand these concepts, your big dreams could turn into big nightmares.

Many sales-minded people are not interested in accounting and finance. My guess is that it’s a right brain/left brain thing.

Having good sales and good margins does not mean you have a good business. There are lots of companies with good sales and good margins that go broke every year.

If you want to have true financially success, then it’s critical to understand the basics of accounting and finance.

If you understand the following top 10 accounting and financial concepts, then good for you. If you don’t, I strongly recommend you take the time to learn and fully comprehend them.

Here are the top 10 (minimum) accounting and financial concepts you need to understand and have built into your business:

1.    Cash flow planning
2.    Balance sheet analysis, especially comparing current assets to current liabilities
3.    Accounts receivable aging
4.    Accounts payable aging
5.    Inventory turnover and aging
6.    Net worth/retained earnings
7.    Debt to equity ratio
8.    Income statement analysis, especially understanding your expenses after gross margin and before pre-tax profit (selling, general and administrative)
9.    Fixed costs vs. variable costs
10.  Internal controls – can two people in your organization collude together and steal cash from you and your business?

Ok, I promise we’ll have much more fun in the next article.

Previously, in our “11 Keys to Success” series we discussed:
Key 1: “Add Value”
Key 2: “Find Passion”
Key 3: “Be Extraordinary”
Key 4: “Start Now”
Key 5: “Find Great Mentors”
Key 6: “’Can’t’ is a Four-Letter Word”
Key 7: “Be Accountable”
Key 8: “Major in the Majors”

Stay tuned next time for the 9th key to achieving great success in life and business.

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Read past articles in Greg’s Million Dollar Mindset at Promo Marketing Magazine online.

Greg Muzzillo, Founder of Proforma
Greg Muzzillo started Proforma as an industry distributor in 1978. The company grew quickly and in the early 1980s Proforma was recognized for three consecutive years on Inc. magazine’s list of the 500 fastest growing companies in North America.

In the late 1980’s Proforma introduced its membership program to enable distributors to retain their business ownership and independence, and to share in sales and marketing resources, purchasing power with industry suppliers, one back office including all billing, accounting, vendor payments, cash flow, computer systems and more.

Today Proforma has more than 750 members with over $500 million in sales. Proforma has over 100 members in its Million Dollar Club and more than 40 members in its Multi-Million Dollar Club (With sales ranging from $2 million to over $26 million). In 2014, eight Proforma members were named to Inc. magazine’s Inc. 5000 List of the 5000 Fastest Growing Companies.

AboutGreg Muzzillo, Founder of Proforma

Greg Muzzillo started Proforma as an industry distributor in 1978. The company grew quickly and in the early 1980s Proforma was recognized for three consecutive years on Inc. magazine’s list of the 500 fastest growing companies in North America.

In the late 1980’s Proforma introduced its membership program to enable distributors to retain their business ownership and independence, and to share in sales and marketing resources, purchasing power with industry suppliers, one back office including all billing, accounting, vendor payments, cash flow, computer systems and more.

Today Proforma has more than 750 members with over $500 million in sales. Proforma has over 100 members in its Million Dollar Club and more than 40 members in its Multi-Million Dollar Club (With sales ranging from $2 million to over $26 million). In 2014, eight Proforma members were named to Inc. magazine’s Inc. 5000 List of the 5000 Fastest Growing Companies.

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