Where Is My Money? I Made Money But I Don't See The Cash In My Bank Account!

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Have you ever felt like this guy? You work hard month after month and at the end of the month, you have more month than money? If so you are not alone. I shared in last week’s post that cash flow is the reason that 82% of small businesses fail. That is a pretty high percentage. There is a way to stay abreast of what is going on with your cash flow and that is taking a look each month at your statement of cash flows.

What Is The Statement of Cash Flows?

According to Investopedia, “A cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. The cash flow statement measures how well a company manages its cash position, meaning how well the company generates cash to pay its debt obligations and fund its operating expenses.” That is it in a nutshell.

What Is On the Statement of Cash Flows?

The statement is comprised of:

• Cash From Operating Activities - These are the core services or products offered to customers that generate cash for the business. Additionally, it includes any uses of cash from the business operations. It also includes changes in cash that can be attributed to accounts receivable, depreciation, accounts payable, and inventory.

• Cash From Investing Activities - These are all the uses of cash and sources from business investments.

• Cash From Financing Activities - This includes money from investors or banks, distributions, and the repayment of debts.

Why You Should Care?

The goal of the statement of cash flows is to ensure that the majority of your cash is coming from operations and it is positive. There are many stakeholders who might be interested in this information including investors, and even potential employees who want to make sure you have a solid cash position that will lead to growth in the future. It helps you to know where your money went. For example, if your bank account has one number and your income statement has another number the statement of cash flows will help you to see where the money “flowed” within your business and answer the question of “Where Is My Money?”Moreover, the statement of cash flow can help you to create a budget for the future and give you peace of mind to know that you are not on the brink of insolvency.

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What Is On A P&L ?

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As business owners, we can be so busy with taking care of our customers and managing our team that taking time to “mind our business financially” can take a backseat. This is dangerous. According to Preferred CFO in conjunction with research done by U.S. Bank 82% of businesses fail due to poor cash flow management. This links directly back to reviewing the P&L regularly to assess how your business is doing in the areas of revenue, expenses, and profitability.

Why You Should Know What Is On The P&L?

The P&L helps you to measure how much you are making versus what you are spending. It also helps you when you need third-party financing. It can also help you with recognizing and analyzing what is selling well and what isn’t.

What Is On A P&L?

The P&L or Income Statement is comprised of:

The revenue or top-line number: This is the total income received from all sales.

The expenses: This is the total amount of money the business spent on operating costs and costs of goods.

The net profit or bottom line number: This is the total of what is left over after subtracting expenses from revenue.

This is a basic description of what is on the P&L and can be more elaborate depending on the type of business.

The P&L is a key financial statement along with the Balance Sheet report. It is used to assess the financial health of your business, measure what goods or services are profitable, is needed for third-party stakeholders like banks, and explains how much money is being spent on expenses. In the end, it explains how much profit you made for all your efforts. It is necessary to review this report along with the Balance Sheet regularly so that you can stay on top of your business financial health and be able to make good business decisions.

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Is The Tax Man Knocking At Your Door?

October 15 is the official tax extension deadline for sole-proprietors, C-Corps & LLC’s taxed as a disregarded entity according to the IRS website. Are you ready to hand over your books to your tax professional? Do you have a tax professional to work with? If the answer is no to both of these questions then start by making sure your books are in order. Many tax professionals complain about receiving a box full of receipts & a spreadsheet from their customers. Check out this post I wrote about why you should keep your books in order and when your ready give me a ring to help you get there. If you are looking for a tax professional check out this post I wrote about how to find one using Dave Ramsey’s Endorsed Local Provider tool.

Happy Tax Season and as always Keep IT Sunny!

Do You Know How Much Money You Made Last Month?

We work hard as entrepreneurs. This is a fact! There are many spokes in the entrepreneurial wheel but after the dusts settles do you take stock of what you are making in your business month to month? As a bookkeeper, I encounter many clients who manage their business using spreadsheets and pen and paper. This might feel comforting and easy but it isn’t the best way to manage your business finances and it won’t give you a good glimpse into how much money you are making in your business. The best way to do this is to get your business finances into electronic format using an accounting software system like Quickbooks Online.

My spreadsheet and my bank account tell me all I need to know which is how much money I have in the bank to spend.

I hear this a lot too and again these methods might give you some information but it won’t give you the complete picture. The best way to know how much money you made last month in your business is to do the following:

1. Do your bookkeeping regularly using an accounting package.

2. Reconcile your accounts each month and make sure they agree to your statements.

3. Pull your financial reports like your balance sheet, income statement and your statement of cashflows.

By using the methods above you will be more informed about how your business is doing and it will give you the knowledge and tools to be able to plan for a successful future.

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Check The Pulse Of Your Business Finances

We are all aware that maintaining positive cash flow in these stressful times is paramount. If you had a chance to read my post last week about how to keep your business afloat in the midst of the storm then you already are aware of some tools you can use to do just that. Today I wanted to share one more resource:

SBA.Gov’s EIDL Program - The Economic Injury Disaster Loan Emergency Advance is “A loan advance that will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties”. The eligibility requirements are:

“The SBA’s Economic Injury Disaster Loan provides vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic. 

This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19.

Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.

The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid. “

These are challenging times that we are facing but we will get through this season of life and move forward stronger than ever before.

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Is Financial Stress Blocking You From Reaching Your Business Goals?

Are you stressed out? If you are you are not alone. According to The American Institute of Stress and The American Psychological Association, "77% of people regularly experience physical symptoms caused by stress. Additionally, 76% of people cite money as the cause of their stress".

Stress and Your Business

As an entrepreneur in the health and wellness space, you help others deal with the effects of daily stress in their lives. The problem is that you put your needs on the back burner and this can cause havoc in your business and in your life. It can show up when managing operational tasks such as your finances. For example, if you are stressed out then most likely you won't stay on course with taking care of receipt management for expenses, monthly bookkeeping, budgeting and forecasting and adjusting prices with your clients to ensure you are bringing in enough revenue. When you are not bringing in enough revenue then you might be tempted to work with anyone instead of your ideal clients and that can certainly add to your stress. 

"How you deal with stress determines how well you and your business do".

So what is the solution?

Stress Management Tips

1. Get enough sleep. If you are not well rested there is no way you can do your best work or make good business decisions. Set a specific time to power down each night and stick to it. If you are having challenges powering down check out apps like Sleep Cycle to help you relax.

2. Create a financial emergency cushion for your business and personal life. Dave Ramsey has great tips on how to do this on his site www.daveramsey.com.

3. Create a financial business team. This team which should consist of a CPA, an attorney, a financial planner and, a good bookkeeper. They can assist you with managing your business finances and ease stress related to planning for your financial goals. 

Financial stress is a daily challenge that most entrepreneurs face. It doesn't have to sink your ship. The key to stress management is prevention. If you put a plan in place to mitigate stress it will have no room to slow you down from reaching your business goals. Do you have tips you can share on how to manage financial stress?

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