Book Reviews

 
Finance

Financial Management Techniques for Small Business

Author: Art DeThomas
Publisher The Oasis Press
Publication Date: 1991

Reviewer:Joel Klebanoff
Joel Klebanoff, is a writer and marketing communications consultant specializing in the information technology industry. He is president of Klebanoff Associates, Inc. He is also author of BYTE-ing Satire: A light-hearted poke in technology's eye.

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Consider your stand on the following statements:
  • A profitable company is always healthy and secure.

  • Growth of aggregate sales is always a positive outcome.

  • All of the numbers you need for effective financial management are available in standard financial statements: the income statement, the balance sheet, and some form of cash flow statement.

  • Financial statements serve only the tax people and, in public companies, the SEC.

  • Financial planning is useless because reality never conforms to plans.
If you manage a small business and believe any of the above statements then, to protect and strengthen your business, you should read Financial Management Techniques for Small Business or a similar book.

If you’re already familiar with financial statements, then you likely won’t learn anything new in the first three chapters. However, skim through them to make sure that you’re not operating under any misconceptions.

The remaining chapters in the first section, “Financial Analysis,” explain the use of various ratios derived from numbers on standard financial statements, as well as data that you will have to gather elsewhere, that will help you evaluate the health of your company.

The second section, containing four chapters plus an introduction, is titled “Financial Planning.” It explains the importance of financial planning and how to go about it. You’ll learn about effective cash planning and how to set up pro forma statements and other valuable planning worksheets.

The final section, titled “Working Capital Management,” contains three chapters plus an introduction. It shows you how to manage your business in a way that ensures there are sufficient assets on hand to continue operations. The chapters in this section look at the various elements of effective working capital management: the management of accounts receivable, inventory, accounts payable and cash.

This book gets right down to business. Concepts are discussed succinctly and effectively. Examples are used to illustrate the concepts. For continuity, the basis of most of the examples is a single hypothetical company.

As the title suggests, this book is directed primarily at small business. Someone above a clerical level in the finance department of a Fortune 500 company should already know most of the material it presents. However, a manager of a small company must wear many hats. Financial management may not be his or her area of expertise, but if he or she does not do it, no one else will and the company will suffer. Financial Management Techniques for Small Business can help compensate for a lack of financial management training and experience.

While the primary audience is small business, some non-financial managers in large companies may also find value in the book. It will help them apply more rigor to the financial aspects of the decisions they must make on a daily basis.