Proprietor – Page 9 – TP Javeton WebNet

In most businesses, what drive the balance sheet are sales and expenses. In other words, they cause the assets and liabilities in a business. One of the more complicated accounting items is the accounts receivable calculation.

As a hypothetical situation, imagine a business that offers all its customers a 30-day credit period, which is fairly common in transactions between businesses, (not transactions between a business and individual consumers).

An accounts receivable asset shows how much money customers who bought products on credit still owe the business. It’s a promise of cash that the business will receive. Basically, accounts receivable is the amount of uncollected sales revenue at the end of the accounting period. Cash does not increase until the business actually collects this money from its business customers.

However, the amount of money in accounts receivable is included in the total sales revenue for that same period. The business did make the sales, even if it hasn’t acquired all the money from those sales yet. Sales revenue, then isn’t equal to the amount of cash that the business accumulated.

To get actual cash flow, the accountant must subtract the amount of credit sales not collected from the sales revenue in cash. Then add in the amount of cash that was collected for the credit sales that were made in the preceding reporting period.

If the amount of credit sales a business made during the reporting period is greater than what was collected from customers, then the accounts receivable account increased over the period and the business has to subtract that difference from net income.

And when the amount they collected during the reporting period is greater than the credit sales made, it means that the accounts receivable decreased over the reporting period, and the accountant needs to add to net income that difference between the receivables at the beginning of the reporting period and the receivables at the end of the same period.

Plan for business

Building a successful and profitable business is no easy undertaking. If you currently own a business this news is obviously not alien to you. Business owners know that building a business from ground up is dependent on many outside factors like competition, timing, market trends and demands, and other elements which you have very little control over, if any at all.

Assuming that all of these outside factors are in your favor, there are factors within your control that are as important – or even more important – as the outside factors mentioned above. One such factor is a business plan. Having a sound business plan can lead to having a successful business and long business life if the plan is adhered to.

That having been said, you will find in the following paragraphs, a number of steps to consider when building your business from the ground up.

Determine your business

What are you selling? This question isn’t as easy to answer as you may think, and to p[rove this point we’ll use a well-known sporting apparel company. Nike is in the sportswear business, but the truth is that when you buy a pair of Nike shoes and a t-shirt at the mall you’re buying a lot more than sportswear — you’re buying an image, a feeling. You’re buying the Nike brand.

Richard Thalheimer, the former CEO of The Sharper Image and the founder of RichardSolo.com, has worked in specialty retail for more than 30 years. When asked what business he’s in, he has often answered, “convenience” or “innovation” before he specifies any particular industry, and Mr. Thalheimer has built one of the most powerful brands in America.

It’s important to keep in mind, that there’s more to a product or service than the product/service itself. More often than not your brand is what sets your product apart from your competitor’s; and your brand is comprised of the kind of service you provide to your customers, quality of your product/service, company policies like “Money Back Guarantee”, “Warranty”, and other such intracacies of your company policy.

Select your market

Who are you selling to? This step is a bit less interpretive than the first, though equally important. Who are you selling to? or more importantly, what do you know about this person? Understanding your consumer is one of the keys to success. What do they do? Where do they hang out? What do they watch on television? Demographics has become one of the most important words in modern (digital age) business.

There are many demographic statistics that you should have at your disposal wehn you are building (and running) your own business. Knowing the answers to these questions can answer a lot of questions of your own when it comes to a devising a marketing strategy. Richard Thalheimer understood his market for The Sharper Image, probably as well as they understood themselves.

From an article in the LA Times some years ago, Tracy Wan, who was president and chief operating officer under Thalheimer says “Richard has the amazing ability to figure out the things that people want to have.” This ability to perceive your consumer’s desire can only be a result of knowing them like your neighbor. Understanding the demographic breakdown of your market is critical.

Create a marketing strategy

How do you speak to these people? A good marketing strategy is the culmination of understanding your brand and your market demographic. As mentioned in number two, understanding your consumer can answer a lot of questions concerning your marketing strategy: Where should you advertise? What’s the voice of your brand? What kind of prices are reasonable for this demographic?

In order to engage your consumer, (i.e. sell your product to them), you must know where your advertisements will be noticed, how to speak to them, and how much they will be able to spend, among many other things. Really, this step is really an extension of the last one, because who your market is dictates your marketing strategy entirely.

Learn by example

Seek advice from those who have done it. There are many books written by professionals who have already started their own business and have been successful in operating them. One that comes to mind immediately, as we’ve already mentioned him a couple of times, is Richard Thalheimer. With “Creating Your Own Sharper Image”, he shares the story of how – using practical, workable strategies – his tiny office supply company, The Sharper Image, grew into a thriving enterprise.

Remember, building a successful business is not all about the dollars and cents. Equally valuable is your brand equity and your ability to engage the consumer; your customers, which is only attainable by understanding them. Assuming there is a demand for your product, and you can compete with the other brands, following these four steps will guide you in the right direction.