Preparing Your Cash Flow Statement

The cash flow statement is used to analyze the cash inflows and outflows
(where the money went) during a designated time period. Recall from the
introduction that there are three major components of cash flow: operations,
investing and financing.

If you regularly do a monthly profit and loss statement, you will be aware
that there are certain items which may not affect your profit and loss statement
for some time, such as:

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Catherine’s business is growing and she’s making a good profit. However, she never seems to have enough money to pay her bills. This month she had to pay the business insurance premium with her credit card. What is wrong with this
picture?

Catherine has what is known as a "cash flow problem. " That means that the cash flowing into her business is out of synch with the cash moving out. The result is that she is temporarily caught short when her bills come due. Catherine needs to plan ahead so she will know whether or not she will have enough cash available when she needs it.

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What Does Your Business Need? - Equity, Debt or Alternative
Financing. Too often women business owners look for financing in the wrong
place. They think that since they are a start-up business they need "venture capital" or a Small Business Administration (SBA) term loan will help when they face a crunch for working capital. The following paragraphs will provide some guidance to helping you identify the type of financing you need for your business.

EQUITY

When an individual or an institution "invests" in your company,
they are making a capital contribution to your business. In return, they own and
have control over some portion of the business and will get repaid through profit sharing or when the company is sold.

The business has to have the following characteristics in order to be attractive to investors:

• High profit margins to provide attractive profit-sharing income (dividends) to the investors.
• Product or service must have significant market appeal and show the potential for rapid future expansion.
• Potential for a significant return on investment through an "exit strategy" such as "going public" or acquisition by a larger corporation. more…
  

Never enough money! How many times have you said that. You need
capital to get sales, buy inventory, pay your employees, purchase assets, pay
taxes, you name it - you need money for it. Your need for capital is a
continuing one. Expansion opportunities or a chance to purchase cost-saving
equipment can also create a need for extra capital. To just stay in business or
to expand, the small business owner needs capital, but where do you get it? more…

One of the most important skills that a business owner must learn concerns
financial management. Becoming the master of your business’s financial fate is
not difficult. It just takes knowledge and discipline. It requires you mastering
four simple steps:

1. Learning the basic financial language and rules of business, so that you
   can translate your business vision and goals into quantitative terms (i.e.
   numbers);
2. Being pro-active, not reactive, by using your financial statements as a business decision-making tool;

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LESSON SUMMARY
 

Many owner-managers run their businesses without a planned goal. In trying to survive from week to week and from month to month, such owner-managers overlook an important management tool — budgeting. Would you ever consider going on a journey without determining what supplies you might need, the mode of transportation or how to take care of things at home while you’re away? Of
course you wouldn’t. Why then would you set off on one of your most important
adventures, starting or managing your business, without a clear picture of
what’s ahead and what resources you’ll need to get there?

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Bookkeeping and Accounting:  From Start to Finish
OWNERS’ REVIEW CHECKLIST

Even if you hire someone to do your accounting and bookkeeping, there are a number of items that that you as the business owner should do periodically. Many small businesses have suffered serious losses when the owner lost track of the numbers and the trusted bookkeeper "borrowed money" and left for an extended cruise. The following checklist will keep you in touch with your business, and perhaps even prevent you from serious losses.

1. Compare actual results to budget. Each and every month
   you need to compare your income and expenses to your budget. This review is perhaps one of the most important tools for a small business owner. It’s a great way to learn what’s working and what’s not working with your business. The goal is not to have an accurate budget… but for you to have a thorough knowledge of what is happening and to know if anything unexpected is
   happening so that you can adjust your actions in a timely manner. What?? You don’t have a budget? Stop right now and let’s go over to the Budget Workshop! more…

Bookkeeping and Accounting:
From Start to Finish

HOW TO USE THIS WALK-THROUGH GUIDE
 

Okay, here’s the scenario for this walk-through lesson: Let’s assume that you are sitting down to do your monthly bookkeeping. It is a day slightly past the end of the month you are doing the books for - say, the tenth. The sun is shining, a bird is chirping outside your window… oops, sorry I got a little carried away there. Anyway, you paid as many bills as you could before the end of last month, you’ve received most bills you’re going to get and - you’re ready to do the monthly accounting.

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The majority of small business owners will need the services of an accountant. Even owners with accounting backgrounds will need help from time to time. Its challenging enough to run the business, much less keep up with tax or benefit law changes.

Here are some of the ways in which an accountant can assist your business:

* Prepare periodic financial statements and annual audit reports.
* Assist you in analyzing your financial statements, looking for problems or opportunities for improvement.
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THE FIVE "C’s" of CREDIT

Your bank is not a charitable institution. It is in business to make (not lose) money. Consequently when a bank lends money it wants to ensure that it will get paid back. To maximize the possibility of being paid back, the bank wants to make sure that there is sufficient assurance that a person can pay back a loan and that she has met such obligations before. The bank must consider the 5 "C’s" of Credit each time it makes a loan.

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