Balance sheet is a picture, on a certain day

The Income Statement is the most exciting piece of the financial picture, unless you used to be an auditor.  I worked in public accounting for years and I always enjoyed unraveling the story of a balance sheet.  For non-accountants, the simplest way to explain a Balance Sheet is that it is a financial story as of a certain day.  Most balances sheets are calculated at the end of the month, end of the year or end of an accounting period.  On that day, the balance sheets reports how many assets the company owned (tangible and non-tangible), how many liabilities are owed to others and the worth of the equity in the company.   Assets tell a lot about how the company is/has been run.  First, there's...

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posted on: 3/22/2008 11:30:00 AM  by Tracie Utter
category: Finances

The "B" word…budget

Budgeting is like losing weight, you know you should do it but it's easy to ignore or so you think.  Eventually, you'll figure out, ignoring the process is expensive.  Without planning, cash flow becomes a problem which leads to debt or missed opportunities.  Since we don't know what the future holds, laying out a plan is a far better choice than hoping everything goes well.  A budget is an important tool.  It's one of the best ways to manage risk.    Not only do you need a budget but you need it done the right way.  So often, I find that the accountant issues a budget.   That is the WRONG WAY to prepare a budget.  I'd rather not have a budget than put the...

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posted on: 3/1/2008 11:30:00 AM  by Tracie Utter
category: Finances

The Income Statement is the best financial tool, continued

Although revenue is my favorite piece of the income statement, expenses have to happen to earn the revenue.   Record everything – I find small businesses neglect to record some expenses, especially if you work from your home. Here are some no-no's:

• Don't mix business cash with personal cash and forget to record something
• If you work from home, don't forget to record expenses as if you were in an office.  Include rent, utilities, supplies, anything that you would have to pay for if you weren't at home.
• If you use one credit card for personal and work, don't use personal cash to pay, use business cash for business charges and personal cash for...

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posted on: 2/2/2008 11:30:00 AM  by Tracie Utter
category: Finances

The Income Statement is the best financial tool

As previously mentioned, the income statement is my favorite statement because you get to follow your company's financial performance.  There is a catch, your income statement is only as good as the data used to create it.  Having a method to accurately capture data is as important as the statement itself.  And guess what, organization is the key.    Revenue Record revenue based on what you earned and will collect in cash.  If you use accrual basis accounting (which you should), record revenue as you earn it.    Service based business on the accrual method – suppose you have a long-term contract with a client which indicates when certain tasks are to be...

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posted on: 1/19/2008 11:30:00 AM  by Tracie Utter
category: Finances

Use financial statement as a way to stay organized

Financial statements should be used as a tool to make better business decisions. There are three basic financial statements every business should use, for-profit or non-profit: