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Financial Management for Entrepreneurs ~ Simplified
 

Financial Management for Entrepreneurs ~ Simplified

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A brief look at Financial Management

A brief look at Financial Management

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    Financial Management for Entrepreneurs ~ Simplified Financial Management for Entrepreneurs ~ Simplified Presentation Transcript

    • Financial Management for Entrepreneurs
    • Our AGENDA
      Accounting & Finance
      Budgeting
      Collecting Account Receivable
      Risk Management
    • Financial Management
      Let’s Find Out More…
    • Operating a Business
      Financial Management
      Legal Management
      Business Management
      Marketing
      Office Management
      Production
    • Financial Management Defined
      • the process of managing the financial resources, including
      Accounting & Financial Reporting
      Budgeting
      Collecting Accounts Receivable
      Risk Management
    • Financial Management Defined
      For small business
      How you raise your capital
      How you manage your money
    • Accounting & Financial Reporting
      • Financial Reporting
      • Accounting vs. Bookkeeping
      • Hiring a CPA
    • Financial Reporting
      your first decision
      self-manage your financial records yourself
      have someone else do it for you.
    • Financial Reporting
      alternative ways you can handle this.
      Manage everything yourself
      Hire an employee who manages it for you
      Keep your records in-house, but have an accountant prepare specialized reporting such as tax returns;
      Have an external bookkeeping service that manages financial transactions and an accountant that handles formal reporting functions.
      Use soft wares
    • Accounting vs. Bookkeeping
      Accounting System
      income, expenses, assets, liabilities
      an organized system for keeping track of
      how the money flows through your business
      where it is supposed to go
      Bookkeeping system
      keeps track of the nuts and bolts -- the actual transactions that take place.
      provides the numbers for the accounting system.
      Both accounting and bookkeeping can be contracted out to external firms
    • Accounting
      Accounting is the big picture
      the system that keeps track of
      data (including people)
      records your transaction history, gives you reports
      It also encompasses
      payroll
      tax status
    • Bookkeeping
      Bookkeeping is the tedious part
      the systematic recording of
      amounts, dates, and sources of every revenue and expense generated.
    • Accounting + Bookkeeping
      Accounting = giant sifter
      Bookkeeping = the process of pouring stuff into it.
      Accounting + Bookkeeping = information needed to run your business
    • Outsourcing Accounting
      Still need
      some type of Recordkeeping System to manage the day-to-day operations of your business
      Financial plan and budget to make certain you have thought through where you are headed in your business finances.
    • Hiring Certified Public Accountant
      Set up accounting system
      Consulting and tax preparation
      Helps generate reports & financial statements
      Updates with tax laws and reduce tax liabilities
      Compile financial statements
      Review statements
      Perform an annual audit
    • Software vs. Shoebox
      A system to monitor your business
      Collections
      Products / services
      Invoices
      Better BOOKKEEPING ~ avoid double entries
    • More on Accounting
      It’s not just about numbers
      Database ~ essential for future planning
      Customers
      Vendors
      Employees
      Establish a sound accounting system
      Input of data
      Record transactions = bookkeeping
      Regularly done
    • Budgeting
      • Bottom Line
      • Operating budget
      • Cash budget
    • Budgeting
      Bottom Line
      Budgeting is an easy but essential process that business owners use to forecast (and then match) current and future revenue to expenses.
      The goal is to make sure that enough money is available to keep the business up and running, to grow the business, to compete, and to ensure a solid emergency fund.
    • Budgeting
      Estimating and matching expenses to revenue (real or anticipated)
      Important for decision making
      fund operations, expand the business and generate income
      Without a budget or a plan, a business runs the RISKof spending more money than it is taking in or, conversely, not spending enough money to grow the business and compete.
    • Budgeting
      Operating Budget
      to provide a blueprint for how the business is going to operate in the coming year.
      information from functional areas such as design, production, marketing, distribution, and customer service.
      the end result is a budgeted income statement that shows how much profit the business expects to make at the end of the year.
    • Budgeting
      Cash Budget
      strictly financial
      a vital purpose: to ensure that the business has enough cash to fund its activities throughout the current period.
      the goal of the cash budget is to ensure that you don't run out of cash.
    • Other purposes of Budgeting
      Check industry standard
      Make a spreadsheet
      Factor in some miscellaneous
      Look for ways to cut costs
      Review periodically
      Look around for services / suppliers
    • Collecting Accounts Receivable
      • Terms
    • Collecting Accounts Receivable
      Reveals patterns of delinquency and shows where you need to focus your collection efforts.
      The longer accounts receivable (AR) languish, the more likely funds are to become uncollectible.
      Accounts receivable are sums due from customers from the time of sale until the receipt of payment.
    • Collecting Accounts Receivable
      The time period and the terms of every receivable should be specified clearly. Terms can be stated in various ways, such as:
      Net 30 days from invoice
      Net 15 days from shipment
      1% 10 days, net 45 days from invoice
      Other options
      deposit upon confirmation, balance upon delivery
    • Collecting Accounts Receivable
      One simple method of assessing the quality of your receivables is to compare the actual collection period, known as days receivable, to the stated payment terms.
      If the days receivable are significantly more than the sales terms, consider developing a receivables aging schedule to monitor who owes you money, when the debt was incurred and how long it has been unpaid.
    • Collecting Accounts Receivable
      Most receivables aging schedules are broken into 30-, 60- and 90-plus-day increments.
      Under each of these categories, total the amount due from each of your customers.
      This allows you to identify the problem customers and focus your collection efforts accordingly.
      An aging schedule also enables you to manage your credit policies according to the standards of your particular industry.
      Many software programs provide aging receivables templates and/or formulas that are handy for small and mid-size enterprises.
    • Collecting TIPS
      Be Prompt: If a payment was due in 30 days, follow up with the customer on day 31.
      Be Consistent: Send regular statements to customers who are behind in their payments.
      Offer Incentives: Consider offering a bonus or cash price discount for early payment.
    • Collecting TIPS
      Be Specific: Spell out any late-payment fees and penalties prior to granting terms.
      Follow Up: Be aware of your customers’ payments and debts. Send acknowledgments when accounts are paid.
      Be Realistic: In the final analysis, an AR aging schedule may indicate that it’s time to sever your relationship with a customer or resort to some other type of collection method.
    • Risk Management
    • Risk management
      Any good system should minimize the risks in your business.
      INSURANCE needs to be considered not only for your property, office, equipment, and employees, but also for loss of critical employees. Even in businesses that have a well set up system, cash flow can be a problem.
      Others ~ cash flow problems, debt obligations
    • Risk management
       The three elements of risk assessment are:
      Risk Identification
      Determining what is at risk and from what sources.
      Risk Measurement
      Determining the consequences of the risk (and to a lesser extent, the likelihood of its occurrence).
      Risk Prioritization
      Determining the appropriate resources to manage the risk.
    • Risk Management
      Risk assessment is a decision-making tool that helps managers sort through a number of possibilities and then chose those with the greatest payoff.
    • Good Luck!
      Thank You
      Merapi Indah