Manage your Business Finances with QuickBooks

  • Published on

  • View

  • Download

Embed Size (px)


Greenberg, Ettlin & Associates, PA presents "A Simple Start to Managing your Business Finances".


  • 1.A Simple Start to ManagingYour Business FinancesA Guide to the EssentialsQB_10/2004_01 The following course covers the basics of financial management for your small business clients, and normally takes less than an hour to complete. Weve included talking points but not a detailed script (we wanted to give instructors flexibility to present in the way that comes naturally and blend in their own perspectives and experience) Please feel free to expand, abbreviate or customize this course as you see fit. Course Introduction: A common goal among almost all small business owners is to maintain ownership and control of their business the good news is research shows that people who take classes and continue to learn, are more likely to succeed, so youre on the right path! Lets get started.1

2. Financial Management Essentials1. Introduction to FinancialManagement 2. Why Accounts are Important 3. Using Reports 4. Managing Essential Tasks:Practice Session 5. Tips and Resources 6. Appendix: AdditionalConcepts & Terms 2 Today well cover: --What is Financial Management and why do you need it? --What are accountsand why do you need them as well? --Reports to understand how your business is doing and make decisions for the future --A quick practice session, to put all youve learned into practice --Some tips and resources for getting started: Classes, online resources, and advisors who can help YOU manage YOUR business And then we have an appendix with additional concepts and terms, which well get to as time permits.2 3. 1. What is Financial Management? Process of: Running your business Recording money coming in and out Using reports to: Understand how your business is doing Make decisions 3 What is Financial Management? Financial management is simply process of: 1. Running your business (tasks you are already doing today) 2. Accurately recording money coming in and out of business (you are probably alreadykeeping track of this as well so well discuss how, as well as the possible benefits of amore systematic approach). 3. Using reports to understand how your business is doing and make decisions3 4. Six Ways Financial Management Helps Your Business Succeed2. Manage Customers and Sales.Know and understand your customersthrough consolidated records.3. Production. 1. Cash Flow. Obtain goods and Track the moneyservices. Apply for and going in and out of establish credit with your business.your vendors. YOURBUSINESS 4. Compliance.6. Funding. Report yourTo be considered for companys incomes,a loan or investment, expenses, and payrollyoull need completeaccurately to the statements.5. Insight and Decision Making.Make informed decisions and price your product or service for profitability with financial reports 4 Why take the time to learn and use financial management methods? Accounting is the language of business, so you and other parties (banks, IRS, etc.) should all speak the same language. 1. Stay on top of your cash flow: Track money in and out of your business. Even aprofitable business can go bankrupt if it doesnt track cash flow. 2. Manage your customers and sales: Track what they are buying, keep records up-to-date so you can contact them 3. Production & Inventory: Know how to obtain goods and services from yourvendors and establish credit 4. Once your records are centralized, you can create reports for a variety ofimportant activities:A. Filing with the IRSB. Understanding how your business is doing (this will help on pricing products and services)C. Sharing your financial picture with third parties (banks, SBA, etc.) to secure loans And then of course, tracking the money going in and out of your newly larger business. All companies, even huge established ones with billions in revenue and 4 tens of thousands of employees rely on financial management for these six areas 5. Information is Power What do you want to know about your business? How much money am I bringing in?Sales How much am I spending? Expenses Is my business making any money?Sales Expenses Whats the value of what my business owns?Assets How much does my business owe to Liabilities others? What is my business worth?Equity5 Participation Question: What are the key questions you have about your business to help you know where your business stands? (Note: create list of things clients would like to know about their business.) There are certain questions all business owners would like answered. Businesses that practice sound financial management and record-keeping will have the answers to these questions (and more) at their fingertips.5 6. 2. Financial AccountsWhy They Matter to Your BusinessAccurate record keeping lets you understand and useall your informationMoney in from payments received Data on customers and vendors Record of your bank accounts Money out for checks written, refunds and other expenses6 Participation Questions: How do you currently keep track of your business? Sales and invoices? Customer and vendor lists? Bills and checks? What are some of the challenges you face with record-keeping today? 6 7. Cash Flow:Money In and Money OutMoney In Money Out Sales ExpensesCUSTOMERSYOURBUSINESS VENDORS Services /Products Services / Out Products In7 Cash is King A healthy cash flow is critical to the viability of your business. The first step towards a positive cash flow is understanding your inflows and outflows: money in and money out. What does your business offer for sale? And then once your receive payment, what do you do with the money? Expenses. What type of products and services do you buy to keep your business running? Your money in from sales and money out from expenses create your cash flow. These are two main account categories. 7 8. Major Account Types Assets Current (cash, inventory, Everything your accounts receivable, etc.) business Fixed (property, vehicles,possesses machinery, etc.)Liabilities Current (within one year) Everything your Long Termbusiness has borrowedEquity Contributed capital: ownersEverything your investmentbusiness owns Retained earnings (profits)Assets = Liabilities + Equity8 There are five major account categories total. In addition to sales/income and expenses, the other major account types are assets, liabilities, and equity. Assets (what you have) = Liabilities (what you borrow/owe) + Equity (what you own)AssetsCurrent (cash, inventory, accounts receivable, etc.)Fixed (property, vehicles, machinery, etc.) LiabilitiesCurrent (within one year)Long Term EquityContributed Capital: What investors, stockholders, family members,partners, owners, etc. invest in the businessRetained Earnings: The total cumulative net profit a business earns over itslife, and not yet distributed Participation Question: Any questions? Now is a good time to ask! There are no bad questions. Were all here to learn. 8 9. Categorize Your TransactionsWith a Chart of Accounts Chart of Accounts Master account lists a chart of accounts are used to sort your transactions into categories Each account category contains sub-accounts9 The master account list, or Chart of Accounts, contains all the different categories used to organize your transactions. Think of each subcategory as a file folder, divided by type (e.g., your expense accounts might include subfolders for advertising, car expenses, payroll, and office expenses). Quick Tip: Try to keep your Chart of Accounts as simple as possible w/o too many subcategories. Financial software programs like QuickBooks Simple Start can help you get started with a basic Chart of Accounts. 9 10. Chart of Accounts: Your Master List of Accounts and Sub-Accounts NAMETYPE NAME TYPEINCOMEASSETSales Income Checking Bank Other incomeOther income Accounts ReceivableAccounts ReceivableEXPENSEUndeposited fundsOther Current AssetAdvertising ExpenseEquipmentAssetCar and Truck ExpensesExpenseLIABILITYContract labor / payrollExpenseLoansLiabilityCost of goods soldExpenseSales Tax PayableOther Current LiabilityEntertainment / meals Expense EQUITYOffice expenses ExpenseContributed CapitalEquityRepairs and maintenance Expense (Owners invested funds) SuppliesExpenseRetained EarningsEquityTaxes and licensesExpense (Business profits) Utilities ExpenseOther expensesOther expenses10 Heres a sample chart of accounts.Your accounts might differ slightly, but the accounts shown here cover the basic categories a business needs to properly record its transactions. Of the accounts listed above: Income comes from sales. Asset categories are: Accounts Receivable; Sales; Savings; Checking, Undeposited fund; etc. Expenses are extensive: advertising, car and truck expenses, commissions and fees, contract labor, etc. Assets are your bank accounts, cash on hand. Liability categories are mortgage, loans, payroll etc. and other current liabilities (sales tax payable). Equity categories are: Owners Capital, and Opening Balance Equity.Quick Tips: Avoid common mistakes: 1. Creating too many accounts 2. Setting up all accounts, including expense accounts, as bank accounts It is important to properly classify all transactions as the are entered dont classify anything as miscellaneous. It will take you much less time to classify accounts properly as they are entered than having to go back and reclassify later. To help you with your chart of account categories, you may want to have an expert consultation (FREE!) with an SBDC counselor or QuickBooks ProAdvisor (more details at end of presentation)Well come back to accounts later when we try a practice problem. 10 11. Accounts: What Weve Learned Consolidate your Use Industry Specific record keeping Accounts Use a standard set ofMaster account lists a chart of accounts accounts or categoriesare readily available for to file away most types of transactionsthere isbusiness. Choose one a common languagespecific to your Keep it simple:industry, and make Significant accounts minor changes ifneeded. only11 So the five major account types are: sales, expenses, assets, liabilities and equity. These accounts, broken down into sub accounts, are used to classify your transactions. The master account list a chart of accounts includes all the different categories used to organize and file your transactions. There is a record-keeping category or account that relates to each of the questions we discussed earlier (slide #5). If you keep track of information using those accounts, youll be able to answer all the questions, without any extra work. How can you measure your profits are? (Sales minus Expenses) What category tells you what youre business is worth? (Equity) Etc. 11 12. 3. Reports Understanding Your Business and Decision-MakingReports help you understand how your business isdoing Use reports as a planning tool Gain insight intoyour sales Income statement(P&L) shows yourprofitability Balance sheetshows assets,liabilities andequity Regularly monitor your profitability and your cash flow12 If your business is a car reports or financial statements are your dashboard. They allow you, as the business owner, the driver of the vehicle, to see how the systems are operating. Are you low on funds? Not earning a sufficient profit margin on your new product line? Reports will organize the information youve filed away to help you see where your business stands and keep your business running smoothly.12 13. Make the Most of Your Reports What do you want to know about your sales? What is selling? Gain insight into Who is buying? the health of Who owes me money? your business with reports: Sales by item Sales by customer Unpaid invoices by customer13 Reports help you answer questions, such as which products are selling, who is buying, and who owes you money. Reports can also show you how your sales compare to a previous period. Three important sales reports are: Sales by Item, Sales by Customer, and A/R aging (Invoices that Havent been paid). Quick Tip: An unpaid invoices report, for example, can make collections easier and make sure no jobs or payments slip through the cracks. 13 14. Income StatementSummarizes therevenue andexpenses of acompany over aperiod of time Also called aProfit & Loss orP&L14 Participation Question: Do you currently produce a Profit and Loss report or Income Statement at your business? Why or why not? The income statement reports how your business performed over a certain period of time. Income statement is also know as Profit & Loss, or P&L The income statement shows whether or not your business was profitable over a certain period of time (normally either a full year or a period of three months).14 15. Balance SheetShows the assets,liabilities, andequity at a givenmoment in time Assets =Liabilities + Equity Equity also referred toas Owners Equityor Retained Equity.15 A balance sheet is a snapshot of your business at a given moment in time. It shows all assets, liabilities and equity. Current assets and liabilities include those that have been incurred within a year. Participation Question: Do you currently produce a balance sheet report for your company? Why or why not?15 16. 4. Manage Essential Tasks Practice Session: Marks Atomic Graphic Designs Money inRemember, the better A. Record a sale you understand B. Invoice a customeryour cash flowsituation, the C. Receive a paymentbetter youll be D. Make a depositprepared to make Money Outthe right business E. Write a check / record an decisions.expense F. Use a credit card / record anexpense16 As a business owner, you need to understand the essential processes of tracking your money coming in and your money going out. Remember, your reports are only as good as your records! Well now walk through 6 common accounting tasks, so you can get a feel for the how to categorize a transaction, as well as understanding of how the transactions impact the reports. Hands-on Option If students have computers they can try these tasks hands-on.16 17. A. Record a SalePractice Session Money In Money In: Record a Sale Customer buys business cards.Pays on spot with cash.1 You issue sales receipt. 17 Participation Question: Before we begin the practice sessions, do you have any questions? If youre unsure about any of the points weve discussed so far, let me know. We can talk it through, so you will feel more confident. [Begin Session] A sale is money in. When a customer pays in cash, what do you do? (Issue a sales receipt.) Participation Question: And what are the most important pieces of information you need to track about a sale? (Think about the sales receipts you get when you buy something in the store). Hands-on Option: Click on Sales Receipts and Create a New receipt.17 18. A. Record a Sale Practice Session Money In Track Your Business 15 Issue salesreceipt4 Record: 1. Customer 2. Item 2 3 3. Quantity 4. Payment type 5. Date 18 Quick Tip: Note that you record this on-the-spot transaction as a sales receipt, not an invoice. A common mistake is to record this type of transaction (on the spot sale) incorrectly. Hands-on...


View more >