photo of how financial statements work
Often, I meet with business owners that are embarrassed that they don’t understand the basics of Finance. If you don’t understand the differences between the financial statements you’re given, how can you use that information to help grow your business? So, here’s a little refresher course on the three Financial Statements, Balance Sheet, Income Statement and Statement of Cash Flows. They each tell you different things about your business. The Balance Sheet tells you the status of your business at a point in time. The Income Statement tells you how your business did over a period of time. The Statement
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illustration of businesswoman walking tightrope over sea of sharks
Small Businesses have very simple financial profiles. There are few employees, few products, and simple production processes. In Family Owned businesses, the family may be the only employees, and the time they spend working is not valued, because it’s free. The immediate concerns are the cost of raw materials, packaging, and freight. Even a Part Time Controller would help, but for now, there is no one to guide the record keeping, provide the Business Metrics to help with an Analysis of Profitability, Cash Flow, or Forecasting. Detailed record-keeping is something you’ll take care of later. There are more important things
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cash flow pie chart drawn in chalk on blackboard
Everyone has a checkbook. If you think about it, your personal life operates just like your business, but it’s on a Cash not an Accrual basis. You receive money and you pay it out. You can’t pay out more than you have. The balance in your checkbook is what you must work with. No more, no less. And, if you have a savings account that you put money into regularly for retirement, or vacation plans, you’re doing Accrual Accounting at your house. Your business is just like that. You have money coming in and money going out. Here’s a simple,
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white puzzle with red area saying work smarter
What Fits Your Business? Mid-sized businesses struggle with the issue of hiring part time people to staff their companies. Whether they are considering hiring a Part Time CFO or other part time staff, the situation is the same. Company staffing is now judged by how many FTE – Full Time Equivalent employees they have. Do you need a Chief Financial Officer at your company 5 days a week? If you are a large company, you might. But if you’re a small business, or a mid-market family owned business, you may only need an outsourced CFO on a fractional basis. The
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illustration of vintage calculator, typewriter and abacus
Have you outgrown them? You have three financial systems operating in your company. You might not consider them all Financial Systems, but one cannot function without the other: Computer hardware Financial software Internal controls Computer Hardware –How old is your computer system? Is it cloud based or server based? Companies are comfortable with the structure that they have been using for the past 5 or even 10 years. But consider this: Outside threats – Not only hackers, but viruses and worms attack your system daily. Are you protecting yourself? Capacity – Do you have the storage and speed to process
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diagram of needed audit process
The best way to prepare for an audit is to understand ahead of time that you ARE going to get audited, and therefore have your company financials in decent order to be able to do the following: Justify expenses as true business expenses. This means actual receipts, not credit card statements, with an understanding of how those items were used in the business. Identify those items that are in the grey area. I am considering that you aren’t purposely doing things that are against the law.  The Tax Code draws a line in the sand about what is a legitimate
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photo of just hands loaning money
One summer, a young girl set up a lemonade stand at the end of her driveway. After several weeks, she had done very well, selling an average of 20 glasses of lemonade per day. At $0.50 per glass, she had average daily sales of $10.00. Not bad at all! But she noticed that many people told her, “I’d love to buy some lemonade, but I don’t have any cash with me.” And they continued on, without buying any lemonade. Then one day she thought she might be able to sell more lemonade if she let these people have the lemonade
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graphic of keeping track of buyers and inventory
A small business owner arrives at the office to find a pile of checks on his desk awaiting his signature. Included are large, critical payments to raw material suppliers, and payments to the utility companies for electricity, water and natural gas used in the manufacturing process. There’s also a check to an office furniture supplier and a local charity. The checks were prepared by the trusted Accounting Clerk, who has been with the company for over 20 years and is the sister of the owner’s next-door neighbor. The pile does not include any additional paperwork, just the checks. The owner,
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photo with measuring tape and text to measure is to know
Each business is unique. This is especially true with small businesses, many of which have developed their own special processes or methods of doing things. However, there are some things that all businesses have in common. They all have something to sell with the intent of making a reasonable profit. They all need to purchase materials or inventory and convert them into their finished product, ready to sell at a competitive price. They need customers to purchase their products. They need to make payments to their vendors, send invoices and collect from their customers (because, don’t forget, a sale isn’t
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cash in pile with money flowing up and over to cash out pile
How Big is Your Gap? Like many professionals, I try to leave my work at the office to make my personal time with the family as free of work-related concerns as possible. However, one particular “business” topic that occasionally comes up, especially during the holidays, is our family’s “cash gap.” Basically, the cash gap is the number of days between when we spend money buying presents, and when I get paid next. You can see why this is important to me! And, just like in my home, an understanding of the cash gap is absolutely critical for your business as
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