Financial Literacy for Digital Marketing Firms

inancial LiteracyFOR DIGITAL MARKETING FIRMSJody Grunden, CPA | Summit CPA Group

Bureau of Digi ta l • Webinar • 2016

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Introduction

**This presentation will be available for download**

Jody Grunden, CPAVirtual CFO

Summit CPA Group

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“Prediction is difficult, especially when dealing with the future”

Why You’re Here

--- Danish Proverb

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Chart of Accounts

4321

Cash vs Accrual

Financial Statement Metrics

Money in the Bank

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Chart of Accounts

432

Cash vs Accrual


Money in the Bank

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Chart of Accounts

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Chart of Accounts

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

AssetsOperating Cash 200,000 217,800 149,600 177,400 205,200 143,000 223,600 251,400 205,200 293,000 320,800 348,600 Cash Reserve 36,800 36,800 92,800 92,800 92,800 92,800 100,000 100,000 100,000 100,000 100,000 100,000 Total Cash 236,800 254,600 242,400 270,200 298,000 235,800 323,600 351,400 305,200 393,000 420,800 448,600

Tax Reserve - 20,000 40,000 - 20,000 40,000 - 20,000 40,000 - 20,000 40,000 Accounts Receivable 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Current Assets 386,800 424,600 432,400 420,200 468,000 425,800 473,600 521,400 495,200 543,000 590,800 638,600 Net Fixed Assets 50,000 49,000 48,000 47,000 46,000 45,000 44,000 43,000 42,000 41,000 40,000 39,000

Total AssetsTotal Assets 436,800 473,600 480,400 467,200 514,000 470,800 517,600 564,400 537,200 584,000 630,800 677,600

Liabilities & EquityAccounts Payable 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Line of Credit 50,000 40,000 - - - - - - - - - - Current Liabilities 90,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Other Liabilites - - - - - - - - - - - - Total Liabilities 90,000 80,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000

EquityPartners Equity 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 Net Income 46,800 93,600 140,400 187,200 234,000 280,800 327,600 374,400 421,200 468,000 514,800 561,600 Distributions - - - (60,000) (60,000) (150,000) (150,000) (150,000) (224,000) (224,000) (224,000) (224,000) Total Equity 346,800 393,600 440,400 427,200 474,000 430,800 477,600 524,400 497,200 544,000 590,800 637,600

Liabilies and Equity 436,800 473,600 480,400 467,200 514,000 470,800 517,600 564,400 537,200 584,000 630,800 677,600

Balance Sheet

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Chart of Accounts


Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000

Production Expense

150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384

Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616

Administrative Expense

65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520

Marketing Expense

28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080

Facility Expense

14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040

Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976

Profit & Loss

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Chart of Accounts

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Payroll Expense 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000

Payroll Tax 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 135,000

Production Benefits

Health Insurance 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000

401K Match 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000

Other Benefits 18,000 13,500 9,000 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 52,650

Production Education 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000

Production Technology 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000

193,250 188,750 184,250 176,600 176,600 176,600 176,600 176,600 176,600 176,600 176,600 176,600 2,155,650

Software Expense 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000

Other Production Expense 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

199,250 194,750 190,250 182,600 182,600 182,600 182,600 182,600 182,600 182,600 182,600 182,600 2,227,650 Total Production Expense

Production Expense

Production Employee Expense

Total Production Employee Expense

Profit & Loss

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Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000

Production Expense

150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384

Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616


65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520

Marketing Expense

28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080

Facility Expense

14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040

Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976

Chart of Accounts

Profit & Loss

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Chart of Accounts


Payroll Expense 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000

Payroll Tax 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 135,000

Admin Benefits


401K Match 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000

Other Benefits 18,000 13,500 9,000 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 52,650

Admin Education 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000

Admin Technology 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000

193,250 188,750 184,250 176,600 176,600 176,600 176,600 176,600 176,600 176,600 176,600 176,600 2,155,650


Other Admin Expense 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

199,250 194,750 190,250 182,600 182,600 182,600 182,600 182,600 182,600 182,600 182,600 182,600 2,227,650 Total Admin Expense

Admin Expense

Admin Employee Expense

Total Admin Employee Expense

Profit & Loss

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Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000

Production Expense

150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384

Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616


65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520

Marketing Expense

28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080

Facility Expense

14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040

Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976

Chart of Accounts

Profit & Loss

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Chart of Accounts


Payroll Expense 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 1,500,000

Payroll Tax 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 11,250 135,000

Marketing Benefits


401K Match 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000

Other Benefits 18,000 13,500 9,000 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 52,650

Marketing Education 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000

Marketing Technology 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000

193,250 188,750 184,250 176,600 176,600 176,600 176,600 176,600 176,600 176,600 176,600 176,600 2,155,650


Other Marketing Expense 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

199,250 194,750 190,250 182,600 182,600 182,600 182,600 182,600 182,600 182,600 182,600 182,600 2,227,650 Total Marketing Expense

Marketing Expense

Marketing Employee Expense

Total Marketing Employee Expense

Profit & Loss

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Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000

Production Expense

150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384

Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616


65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520

Marketing Expense

28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080

Facility Expense

14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040

Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976

Chart of Accounts

Profit & Loss

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Chart of Accounts


Rent 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000

Cleaning & Maintenance 500 500 500 500 500 500 500 500 500 500 500 500 6,000

Repairs 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

Utilities

Gas 900 900 900 900 900 900 900 900 900 900 900 900 10,800

Electric 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400

Water 300 300 300 300 300 300 300 300 300 300 300 300 3,600

Other Facility Expense 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

14,900 14,900 14,900 14,900 14,900 14,900 14,900 14,900 14,900 14,900 14,900 14,900 178,800 Total Facility Expense

Facility Expense

Profit & Loss

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Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000

Production Expense

150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384

Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616


65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520

Marketing Expense

28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080

Facility Expense

14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040

Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976

Chart of Accounts

Profit & Loss

Where is OWNERS Compensation?

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Revenue 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000 312,000

Production Expense

150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384 150,384

Gross Profit 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616 161,616


65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520 65,520

Marketing Expense

28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080 28,080

Facility Expense 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040 14,040

Net Income 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976 53,976

Owner's Comp 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500

NI after O Comp 41,476 41,476 41,476 41,476 41,476 41,476 41,476 41,476 41,476 41,476 41,476 41,476

Chart of Accounts

Profit & Loss

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Chart of Accounts

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Cash vs Accrual


Money in the Bank

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Cash vs Accrual

2 421

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What is Cash Basis, Accrual Basis, and Tax Basis?

Cash Basis

Recognizes Revenue & Expenses

Accrual Basis Tax Basis

When Cash is Received and

Expenses are Paid



When Earned & Incurred

Cash or Accrual Adjusted for Tax

Purposes

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What is Cash Basis, Accrual Basis, and Tax Basis?

Only CashOnly Cash

All Earnings

Not Paid

$1,990 Difference

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Chart of Accounts

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Cash vs Accrual


Money in the Bank

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2 43

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# of Production EE 1 10 20 50 % of IncRevenue 200,000 2,000,000 4,000,000 10,000,000 100.0%


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# of Production EE 1 10 20 50 % of IncRevenue 200,000 2,000,000 4,000,000 10,000,000 100.0%Employee Cost 75,000 750,000 1,500,000 3,750,000


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Burden Rate 1.24 1.24 1.24 1.24 Employee Cost 93,000 930,000 1,860,000 4,650,000 46.5%


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Burden Rate 1.24 1.24 1.24 1.24 Employee Cost 93,000 930,000 1,860,000 4,650,000 46.5%Other Production 8,000 80,000 160,000 400,000 4.0%Gross Profit 99,000 990,000 1,980,000 4,950,000 49.5%


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Burden Rate 1.24 1.24 1.24 1.24 Employee Cost 93,000 930,000 1,860,000 4,650,000 46.5%Other Production 8,000 80,000 160,000 400,000 4.0%Gross Profit 99,000 990,000 1,980,000 4,950,000 49.5%Overhead Cost 60,000 600,000 1,200,000 3,000,000 30.0%

Admin 42,000 420,000 840,000 2,100,000 21.0%Sales & Marketing 18,000 180,000 360,000 900,000 9.0%


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Facility Cost 9,000 90,000 180,000 450,000 4.5%


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Facility Cost 9,000 90,000 180,000 450,000 4.5%Total Overhead Cost 69,000 690,000 1,380,000 3,450,000 34.5%


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Facility Cost 9,000 90,000 180,000 450,000 4.5%Total Overhead Cost 69,000 690,000 1,380,000 3,450,000 34.5%Net Income 30,000 300,000 600,000 1,500,000 15.0%


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Chart of Accounts

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Cash vs Accrual


Money in the Bank

1 42 3

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1

Money in the Bank

2 3 4

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Money in the Bank








Balance Sheet

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# of Production EE 20

Revenue 4,000,000 Employee Cost 1,500,000

Burden Rate 1.24 Employee Cost 1,860,000 Other Production 160,000 Gross Profit 1,980,000 Overhead Cost 1,200,000

Admin 840,000 Sales & Marketing 360,000

Facility Cost 180,000 Total Overhead Cost 1,380,000 Net Income 600,000


4,000,000X 10%

400,000

Cash on Hand

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Money in the Bank








Balance Sheet

4,000,000x 10%

400,000

Cash on Hand

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4,000,000X 6%

240,000

Tax Reserve

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Money in the Bank








Balance Sheet

40,000+ 224,000

264,000

Tax Reserve

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Money in the Bank








Balance Sheet

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150,000/ 4,000,000

3.75%

Tax Reserve

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Money in the Bank








Balance Sheet

150,000/ 4,000,000

3.75%

A/R

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Money in the Bank








Balance Sheet

Quick Ratio

$638,600 / 40,000

16:1

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Money in the Bank








Balance Sheet

638,600/ 40,000

16:1

Quick Ratio

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Chart of Accounts

4321

Cash vs Accrual


Money in the Bank

Questions? Need more info?Feel free to get in touch!

Summit CPA Group

Jody Grunden, [email protected]

www.summitcpa.net

Business

Financial Literacy for Digital Marketing Firms