“Small business owners can delegate the creation of their financial statements to their internal or external bookkeepers. They cannot abdicate responsibility for their accuracy or their understanding.”

Founded in 1981, Business Ventures Corporation is dedicated to providing tools that enable small business owners to grow profitably and improve their business skills.

Ruth King is founder and CEO of Business Ventures Corporation. She has helped thousands of businesses grow and succeed, one which had a negative $400,000 net worth when she first began working with them. This same company is now profitable, in business today, more than 15 years later.

Ruth has written many manuals and books including “Keeping Score: Financial Management for Entrepreneurs.” She was the 2006 USA Best Books Winner for Entrepreneurship and a finalist for the Independent Publisher Awards (IPPY) for her first book, The Ugly Truth about Small Business (Sourcebooks). Her second book, The Ugly Truth about Managing People, was published by Sourcebooks in 2007. She is currently working on the third book in the series, The Ugly Truth about Cash.

MO: Where does your passion for entrepreneurship and finance come from?

Ruth: I started my first business before the age of 10 – I sold flowers by the road side. It was fun and fueled my interest in entrepreneurship. My father and grandfather both owned their own businesses. It’s probably in my genes!

I had my first finance class in graduate school – I’m a chemical engineer who didn’t take one business class in college – because none were offered (we’re talking about a long time ago here). The first time I had to complete a tax return I didn’t know what the difference between cash and accrual accounting was. I knew I had to find out. I also knew that I didn’t know anything about accounting and finance and I needed to learn to be successful. I went to MBA school and fell in love with finance. I got it instantly and being a teacher by nature I found it easy to teach and explain to others.

 

MO: Can you share with our readers how and why you developed Turn On My Financial Lightbulb™? What kind of results can your customers expect after purchasing your program?

Ruth: I’ve been teaching a version of TurnOnMyFinancialLightbulb for more than 20 years. The class was designed to teach business owners what they needed to know without taking a painful three month bookkeeping class – which they won’t do. It was developed because of my first client, a florist. She had a bookkeeping company doing her books. At the end of the month when she got her statements, she looked at the bottom of the profit and loss statement, saw a profit, threw the statements in a drawer and never looked at them again.

Then, she began having cash flow problems and couldn’t pay her bills. She called me and asked for help. I saw some glaring warning signs on her financial statements and gently asked her whether she knew what the statements were telling her. She said no. I gave her a list of questions to ask the bookkeeping firm. Long story short – whenever the bookkeeping company didn’t know what something was they put it it in miscellaneous sales! She fired that company and I made her take a painful three month bookkeeping class. I knew there had to be a better way so I started developing the class towards owners who needed to understand financial statements, cash flow, and pricing rather than do the debits and credits necessary to create them.

The name, TurnOnMyFinancialLightbulb, was not the original name of the class. One of the business owners sent me an email after class and said, “For the first time, my light bulb finally went on.” I changed the name of the class because it fit what actually happens when business owners enroll in class.

The class is totally practical. There is not one drop of theory in class. Business owners will truly understand what their balance sheets and profit and loss statements are telling them. They’ll understand the difference between profits and cash. They’ll know how to price as well as how to manage cash. They’ll be able to spot minor issues before they become major crises. They will be able to make good business decisions on accurate financial statements. And yes, they will be able to spot inaccuracies in their financial statements.

MO: What are some of the most prevalent misconceptions people have about managing their own finances? Is it possible for most small businesses to tackle their own accounting?

Ruth: All small business owners must understand: profits are not cash, inventory is a bet, you can’t take a percentage to the bank, and their balance sheet is more important than their profit and loss statement.

Small business owners can delegate the creation of their financial statements to their internal or external bookkeepers. They cannot abdicate responsibility for their accuracy or their understanding.

MO: What are some of the essential questions that entrepreneurs should be asking their accountants?

Ruth: Why do I need you, other than keeping up with tax law and helping me pay the legal minimum taxes?

What do you look at when preparing a financial statement?

What do you consider a “good financial statement?” What do you consider a “bad financial statement?”

What type of advice are you prepared to give me? How will you bill me? Will you charge me every time I call with a question?

MO: What are some of the most common mistakes you see your clients make and how can they be avoided?

Ruth: The most common mistake is not having accurate, timely monthly financial statements. The second most common mistake is not understanding what the financial statements are telling you and relying on your profit and loss statement rather than your balance sheet. The third is when you look as if you are having problems, not getting help before it is too late.

Learn to read a p&l and balance sheet. It isn’t rocket science. It just takes a little practice – something I know that you do when you take up a new hobby or learned the language of your business.

MO: Can you tell us about the book you’re currently working on? What has been inspiration behind it and what has your creative process looked like?

Ruth: I’m working on the third book in the Ugly Truth Series – the Ugly Truth about Cash. The first book, which started it all, is The Ugly Truth about Small Business. I wrote it because I lost a $1.6 million contract, $800,000 of investment riding on that contract, and a partner the same day – and still started my sixth business in 1992. When the dust had settled and the business was growing I knew that I wasn’t the only one who had gone through horrific experiences and survived. The book is a book of hope – 50 business owners share their entrepreneurial terror in hopes that readers can avoid the mistakes they made and know they are not alone – all business owners go through tough times – the business success depends on getting through the tough times.

The Ugly Truth about Cash follows the same lines – 50 entrepreneurs sharing their cash crises and how they dealt with them.