Alright, business gurus and side hustle aficionados, it’s time for a financial reality check. Don’t worry, this won’t be too painful. Let’s see if you’re really the financial whiz kid you claim to be—or if you’re playing darts in the dark. Here are accounting questions every small business owner should know.
Question 1: What’s Your Break-Even Point?
This is Business 101, folks. If you don’t know when you’re making more money than you’re spending, then Houston, we have a problem. The break-even point is where your total revenue equals your total costs. Simple, right?
a) Yes, to the dollar.
b) Roughly, give or take.
c) What’s a break-even point?
Question 2: What’s your monthly burn rate?
Honestly, what does it cost you to keep the doors open month in and month out? Not just an approximation but the real number with all the little details..
a) I know it exactly.
b) I know about what it is.
c) I don’t want to know because if I really did, it would probably scare me.
Question 3: How Much Working Capital Do You Need to Have?
So, if you knew the last one, then this should be pretty easy. You know, that extra cash you have to pay bills to cover unexpected costs and maybe even grow the business? If you don’t know this, well, good luck to you. Most small businesses have a month’s working capital in reserve, plus or minus.
a) I have a solid 90-day plus reserve and never touch it.
b) Enough to cover payroll and rent.
c) whatever is in the checking account at the end of the month.
Question 4: Do You Really Know Your Profit Margin?
Is your business actually making money? Subtract costs from revenue, divide by revenue, then multiply by 100. This isn’t calculus, people.
a) Higher than the Empire State.
b) It’s alright, could be better.
c) Wait, this isn’t all profit?
Question 5: How’s Your Cash Flow Looking?
Cash flow is the heartbeat of your business. It’s how you keep the lights on. Are you making more than you’re spending?
a) Cash flow is king, and I’m royalty.
b) It’s okay. I’m surviving.
c) It flows out more than it flows in.
Question 6: What’s Your Accounts Receivable Turnover?
You’re selling stuff—that’s great. But are you getting paid for it? Your A/R turnover ratio tells you how quickly customers are coughing up the cash.
a) Fast and furious. We’re always paid on time
b) Eventually, they pay, but we have to make a few calls every month.
c) Is that why my bank account is empty?
Question 14: How Often Do You Review Your Financial Statements?
Monthly? Quarterly? Never? The frequency matters, people.
a) Monthly, like clockwork.
b) Quarterly, I guess.
c) I’m supposed to review those. I don’t even know how to read them.
- Mostly As: Seriously, are you an accountant masquerading as a small business owner? Well done.
- Mostly Bs: You’re not failing, but you’re not acing it either. Time for a financial tune-up.
- Mostly Cs: Let’s call this what it is—a financial fiasco. Time to get educated or get help.
So there you go. You’ve been quizzed. Feel smarter or just humbled? Either way, consider this your financial wake-up call.
And there you have it. Did you pass, or should we send you back to Small Business School? Either way, knowing your numbers is non-negotiable. Get on it.
Your fallback plan?
Alright, it’s time to be a little more serious. If you answered mostly c’s and a few b’s you are really not that much out of alignment with a lot of small business owners, so hopefully, that’s comforting. But you need to do better. Not just because it’s the right thing to do but because it’s the right thing for you.
You got your business started, and you made it this far; that’s a big deal, but having a reliable partner to take care of the books and your monthly accounting does more than just let you sleep at night. They get you the information you need to be stable and take it to the next level.
If you have questions or want to talk about what you’d like to have from a partner who can handle your monthly accounting, give us a call. No sales pitches, just honest conversations.