Accounting and Finance for Your Small Business. 2nd Edition

  • ID: 2212078
  • Book
  • 312 Pages
  • John Wiley and Sons Ltd
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"Once again, Bragg has turned his discerning eye and formidable talents on a topic and the results are outstanding. Both those new to the business and the long–established entrepreneur will benefit greatly when he joins forces with E. James Burton to produce this outstanding work."
Mary S. Schaeffer, Editorial Director Accounts Payable Now & Tomorrow

"I use the tips and practices found in [this book] all through the year. They are clear, direct, and efficient which, in turn, improves our company and our bottom line. I recommend [this book] to anyone wanting to improve their own bottom line."
D. R. Drum, CIO, CSO Engineering/Accounting, Dragon Moon Productions

"Eminently accessible, this book is a must–read for the entrepreneur, both new and established alike. Organizationally, the work flows smoothly and logically in a way that is valuable for the start–up as well as the veteran needing a refresher on specific aspects of the small business accounting/financing picture. I found particularly useful the rich resourcefulness that Messrs Burton and Bragg brought to the table in compiling the essential checklists for every conceivable corner of the entrepreneur′s financial realm from fraud prevention to financing options. As a small business owner myself, I was well pleased with the real–world guidance and instant ′useability′ this book offers."
David Struthers, JDFacilitator/Trial Lawyer

"This book is essential for any small business owner, manager, or accountant′s business tool kit. This easy–to–read book distills complex subject matter into meaningful and understandable information and is a great refresher course for those deeply involved in the accounting and financial matters of a small business. The book contains many examples that can be used immediately in daily operations to improve the quality of information for better decision making. The book provides those involved in small business the framework to manage what they measure."
Jim Bologa, CFODaticon, Inc.

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Preface xiii

Section I Preparing to Operate the Business 1

Chapter 1 Budgeting for Operations 3

Definition or Purpose of an Operating Budget 3

Signs of Budget Ineffectiveness 4

Improvements to the Budgeting System 6

Responsibility Accounting 9

Budget Tracking and Maintenance 21

The System of Interlocking Budgets 25

Need for Budget Updating 35

Summary 36

Chapter 2 Investing in Long–Term Assets and Capital Budgeting 39

Definitions 40

Overview and Use of Capital Budgeting 41

Life Cycles 42

Capital Budgeting Sequence 43

Producing Numbers to Get Dollars, the Use of Forms, and the Capital Budgeting Model 48

Miscellaneous Considerations 65

Product Discontinuance 66

Bailout 68

Summary 69

Appendix: Examples and Comparison of Calculations 70

Chapter 3 Basic Control Systems 77

The Need for Control Systems 77

Types of Fraud 79

Key Controls 81

When to Eliminate Controls 97

Summary 99

Section II Operating the Business 101

Chapter 4 Cash Flow Concerns 103

Cash 103

What to Do with Excess Cash 105

Cash Flows 108

Introduction to Cash Flow Budgets 112

Indications of Cash Flow Problems 112

Managing Cash 113

Preparation of the Cash Budget 126

Disbursements 127

Net Cash Flow and Cash Balances 130

Exceptions to Expected Cash Flows 131

Summary 132

Appendix: Cash Flow Example 133

Chapter 5 Financing 143

New Businesses 143

Zero Working Capital and Zero Fixed Assets 144

Types of Financing 148

Private Placement of Stock 157

Swapping Stock for Expenses 158

Stock Warrants 159

Stock Subscriptions 159

How to Obtain a Bank Loan 160

Sources of Debt Financing 167

Types of Loan Arrangements 168

Restrictions on Loans 171

Conditions That a Borrower Should Seek 173

Summary 175

Section III Evaluating the Operations of the Business 177

Chapter 6 Performance Measurement Systems 179

Financial Ratios 180

Types of Financial Ratios 182

Using Performance Measurements for Predictions 193

Operating Ratios 196

Other Ratios 202

The Balanced Scorecard 204

Summary 207

Chapter 7 Financial Analysis 209

Risk Analysis 209

Capacity Utilization 215

Breakeven Analysis 222

Summary 229

Chapter 8 Taxes and Risk Management 231

Controlling Tax Liabilities 232

Risk Management 237

Insurance 245

Types of Insurance Companies 249

Claims Administration 250

Summary 252

Chapter 9 Reporting 255

Federal Government Requirements 255

State Government Requirements 262

Local Government Requirements 267

Creditors 268

Equity Holders 269

Management Reports 269

Summary 286

Index 289

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Steven Bragg, CPA, CMA, CIA, CPIM, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a Master s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor s degree in Economics from the University of Maine. He has been the two–time president of the Colorado Mountain Club, is an avid alpine skier and mountain biker, and is a certified master diver.

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E. James Burton, Ph.D., CPA, CFE, is dean of the College of Business and a full professor of accounting at Middle Tennessee State University. He has founded, owned, managed, and sold a number of businesses in a variety of areas from service to manufacturing. He received a Bachelor of Arts degree from MacMurray College in economics/business, a Master of Business Administration degree from Murray State University in management, and a Ph.D. in accountancy from the University of Illinois at Urbana–Champaign. In addition to over 50 journal articles, he has written Total Business Planning: A Step–by–Step Guide with Forms that has continued through three editions and translation into Norwegian. He resides in Murfreesboro, Tennessee.

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