S11 E29-32 (TurboCharge Your Business) Accounting Fundamentals with Patty Lawrence

S11 E29-32 TurboCharge Your Business - 13 Weeks to Financial Literacy on the IBGR.Network.

Welcome to TurboCharge Your Business, a show for business owners who are tired of just working IN the nuts and bolts of their businesses and ready to work ON the business itself from a big-picture, growth-oriented, strategic perspective. 

I’m Patty Lawrence: founder of TurboExecs, money finder, consulting CFO, and right hand to growth-minded CEO’s. This season is called 13 Weeks to Financial Literacy and over the course of the season, I’m teaching you everything you need to know to take your business from confused and chaotic to strategically growing with you in the driver’s seat. Before we get into this episode, you can reach me at turboexecs.com. 

ACCOUNTING FUNDAMENTALS

Today's show is about accounting fundamentals in your business. By the end of our time together, you'll gain an understanding of the accounting basics you need as a business owner to gauge the financial health of your company.

S11 E29 Accounting Fundamentals: Chart of Accounts
A chart of accounts is a framework for accounting for your business. 

But why does it matter?

As a business owner, you need a basic understanding of your financials. You need to know this to:

• Communicate it better with your advisors, bankers, etc. 
• To better understand and communicate what your needs are for your business
• To know which metrics and KPIs are important to watch in your business

You should be watching those metrics on a regular basis to take action on them and stay in control of your business…rather than descend into chaos! 

There are a few main buckets that make up the chart of accounts:

• The income statement, where you can measure your revenue, cost to deliver on your revenue promise, and overhead costs. This resets every year.
• The balance sheet, where you can see your assets (such as inventory, cash, and accounts receivable), liabilities (such as accounts payable, sales tax, and loans), and equity (what you as the business owner have in as far as the business’ financial value). This is cumulative and represents a snapshot of our business since inception.  

The chart of accounts is the framework that holds all of these different areas. We can structure it to see more clearly and get the reports that really matter. 

Listen to “TurboCharge Your Business” on the International Business Growth Network or wherever you get podcasts and gain access to even more great resources at https://turboexecs.com/turbocharge. 

TAGS: accounting fundamentals,fundamentals of accounting,income statement,income statement and balance sheet,cash flow statement,what is a balance sheet,finance training,finance education,how to read a balance sheet,how to make a balance sheet,how to do a balance sheet,balance sheet

S11 E30 Accounting Fundamentals: Balance Sheet 
The balance sheet is the most critical of your financial statements because it’s the report that’s been with you since you founded your business. It’s cumulative, and it shows the numbers in your business since inception. It includes:

• Assets - what you own.
• Liabilities - what you owe.
• Equity - the difference between the two (hopefully, a positive number!) 

Assets include two distinct areas:

• Current assets, which are liquid. For example: cash, accounts receivable, inventory, other cash equivalents.
• Non-current assets, which are more long term over at least a year. For example: investments, property, plant equipment, office furniture, computers, goodwill. 

Liabilities include two distinct areas as well:

• Current liabilities, which are one year or less. For example: accounts payable.
• Non-current liabilities, which are financed into three to five to ten years. For example: debt like a mortgage or vehicle loan. 

Equity breaks down into:

• Capital - what you paid into the business. 
• Retained earnings - earnings retained into the business over time. 
• Owner distributions - a reduction in your equity

 
Listen to TurboCharge Your Business on the International Business Growth Network or wherever you get podcasts and gain access to even more great resources at https://turboexecs.com/turbocharge. 

TAGS: accounting fundamentals,fundamentals of accounting,income statement,income statement and balance sheet,cash flow statement,what is a balance sheet,finance training,finance education,how to read a balance sheet,how to make a balance sheet,how to do a balance sheet,balance sheet

​S11 E31 Accounting Fundamentals: Income Statement  
The income statement is the most paid attention to report in all of accounting.

Why? 

Because it includes those vanity numbers, like top line revenue/sales.

The income statement breaks down into a few different buckets:

• Revenue - sales
• Cost of sales / cost of goods sold - the direct cost to deliver on your revenue promise 
• Gross profit - revenue minus the direct cost of sales. 

You need to have cash generated in your business above and beyond profit, because you have obligations for that cash and towards the growth of your business. You need to be generating lots of profitability in your business so that you can fuel your growth and move the business forward. 

Gross profit is the engine that prints money and generates that cash flow. This number needs to cover your overhead costs (such as administrative expenses, utilities, rent overhead, marketing expenses, R&D, general expenses), cash flow items, debt payments, charitable contributions, etc.  

A monthly income statement, set up to measure against a budget, will help you have your controls in place and understand what your numbers are actually communicating. With a budgeted income statement and an income statement for this period versus a prior period, you can understand progress and where to make adjustments. 

Listen to TurboCharge Your Business on the International Business Growth Network or wherever you get podcasts and gain access to even more great resources at https://turboexecs.com/turbocharge. 

TAGS: accounting fundamentals,fundamentals of accounting,income statement,income statement and balance sheet,cash flow statement,what is a balance sheet,finance training,finance education,how to read a balance sheet,how to make a balance sheet,how to do a balance sheet,balance sheet

S11 E32 Accounting Fundamentals: Cash Flow 
As I always say, cash is king! It’s the most important aspect of your business because without it, you can’t take your business anywhere. Cash gives you options, and you want to have as much of it in your business as you can.

Profit isn’t necessarily cash flow. Profit really only looks at income and expenses. You can be profitable, but cash poor because you can be making sales that aren’t generating enough cash to afford the activities that you have going on (like your balance sheet items). You won’t see vehicle loans or a mortgage on your income statement, and yet you need to be generating sufficient cash and profit to satisfy those cash requirements that sit on your balance sheet. That’s what cash flow is all about.

Cash flow concerns the movement of money in and out of your business. It moves in ebbs and flows, and it functions as the gas of your business engine because you need cash to make cash. 

Something important to consider when it comes to cash is: where is cash tied up in your business? Obviously, you have cash in your checking account and we need that on hand. But where else could you have cash tied up in your business? It could be on your balance sheet in accounts receivable or inventory as cash to be converted. You can rework those AR terms to pull cash back into your business more quickly or free up that inventory back into your checking account.

There are other places cash could be tied up in your business, and I call these leaky buckets. Maybe you’re spending cash you don’t need to be spending, or labor inefficiencies are costing you money. We need to fix those leaky buckets because they’re costing us not only profit but cash. 

When we understand what our cash flow is, we can start to manage our cash better. Because remember: cash is king!

TAGS: accounting fundamentals,fundamentals of accounting,income statement,income statement and balance sheet,cash flow statement,what is a balance sheet,finance training,finance education,how to read a balance sheet,how to make a balance sheet,how to do a balance sheet,balance sheet 

TurboCharge Your Business is a show for business owners who are tired of just working IN the nuts and bolts of their businesses and ready to work ON the business itself from a big-picture, growth-oriented, strategic perspective.

Listen to TurboCharge Your Business on the International Business Growth Network or wherever you get podcasts and gain access to even more great resources at https://turboexecs.com/turbocharge. 

Patty Lawrence is a money finder, consulting CFO, right hand to growth-minded CEOs, and founder of TurboExecs. At TurboExecs, she works with $2M+ professional services and non-profit organizations that struggle to get the timely & accurate financial reports they need to function, often because one person holds this information hostage or lacks the skills required to do the work.

Through outsourced accounting and CFO services, she and her team reveal the story behind the numbers so leaders confidently can make data-driven decisions that allow them to leap forward, trusting they have the team and finances in place for manageable, profitable growth. As a result, TurboExecs’ clients typically increase the bottom line by at least 15% and feel in full control of their finances and results.

Connect with TurboExecs at turboexecs.com. Continue the conversation with Patty on LinkedIn.

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