Limiting Factors: How to Keep Small Things from Becoming Big Things

In every business there are opportunities to expand and improve and optimize and it’s easy to get excited about those elements. But there are “reins” on the growth that pull back sharply if the growth starts to happen too quickly. These are called “limiting factors”. Every business has them but few businesses take the time to figure out what they are or what to do about them.

Limiting factors are like bottle necks in the “factory” of your business. They are aspects of your business that, no matter how well you do, will keep you from doing better without some kind of drastic measure.

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“But my BAD debt isn’t really that bad… is it?”

Unless you get money from customers up-front before you give them the product or service they purchased from you, you will likely get shafted now and then from customers who will never pay.

In spite of your best efforts, these receivables end up getting older and older and you realize that you will never collect from them. Everyday people might call this “hopeless” but in accounting lingo, it’s called “bad debt“.

It’s tempting to just ignore your bad debt. (Hey, no business owner wants to be reminded of a customer who pulled a fast one on them). Unfortunately, doing that will artificially inflate the assets on your balance sheet while also misstating your profit.

But you do need to do something with these numbers! Here’s what to do:

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But HOW do You Make Sure Timing is Correct?

Last week we talked about timing and making sure that certain costs were entered when they are relevant. This is a very difficult territory for some and confusing for others.

I am going to try to make it simple (and I hope I’m able to do so!)
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Timing is everything

You can kill a great joke with bad timing. And, you can kill great bookkeeping with bad timing, too. Bookkeeping is not just about entering the numbers; it’s about entering the numbers at the right time.

If a customer pays you to do some work, their money should be reflected in the month you actually deliver the product or service. This sounds basic but it’s often ignored. Here’s why it’s important:
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