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So Thats Where The Money Goes! By Tom Shay
 

So Thats Where The Money Goes! By Tom Shay

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Many small businesses do not understand why it is that the net profit for a month does not represent the amount of money in the checking account. The question is, "Where is the money if I made that ...

Many small businesses do not understand why it is that the net profit for a month does not represent the amount of money in the checking account. The question is, "Where is the money if I made that much profit?" This Tom Shay provides insight to the solution. www.profitsplus.org

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    So Thats Where The Money Goes! By Tom Shay So Thats Where The Money Goes! By Tom Shay Presentation Transcript

    • Tom Shay, CSP Certified Speaking Professional
    • Budgeted net profit
      • Just because the profit and loss statement says there is income, does not mean this is how much money is in the checking account to take out!
      • So, where is it?
      www.profitsplus.org
    • Where is the net profit?
      • Higher inventory than last year
      • More equipment than last year
      • Higher receivables than last year
      • Lower payables than last year
      www.profitsplus.org
    • Your P & L Statement or Income Statement www.profitsplus.org
    • Your Profit & Loss Statement or Income Statement
      • Usually created on a monthly basis.
      • Definitely created on an annual basis
      • Purely historical
      www.profitsplus.org
    • Cost of Goods Sold vs. Cost of Doing Business
      • Cost of Goods Sold is usually for businesses that sell products.
      • Cost of Doing Business is usually for businesses that sell services.
      www.profitsplus.org
    • Cost of Goods Sold vs. Cost of Doing Business
      • Beginning inventory + Inventory purchased – Ending inventory.
      • Refers to the business as a whole – not a single transaction.
      www.profitsplus.org
    • Gross Margin vs. Gross Profit
      • Gross margin is a percentage.
      • Gross profit is a dollar amount.
      • Calculated as the revenue minus the cost of the item, divided by the revenue.
      • Often refers to a single item or service.
      www.profitsplus.org
    • Gross margin vs. Gross markup
      • Gross margin – cost as a percentage of selling price.
      • Gross markup – selling price as a percentage of cost.
      • Margin is 50% Cost is $2.00 Selling price is $4.00
      • Markup is 100% Cost is $2.00 Selling price is $4.00
      www.profitsplus.org
    • Maintained Gross Margin
      • The margin on the products and services – calculated after any markdowns or discounts.
      • This is not your initial gross margin
      www.profitsplus.org
    • Balance Sheet www.profitsplus.org
    • Balance Sheet
      • Your monthly checkup –
      • Stockholder’s equity - How much of the business do you control?
      • Is your equity increasing?
      www.profitsplus.org
    • Budget
      • Budgeting refers to setting aside money for future expenses
      • Monthly vehicle payments were $500, and is now paid off
      • Are we setting aside the monthly $500 or are we taking the $500 out of the business?
      www.profitsplus.org
    • Budget
      • A profit and loss statement (income statement) written as a projection of what you expect to happen.
      • Creating the profit and loss sheet of the future!
      • Deciding with detail how you define this year as being a good year
      www.profitsplus.org
    • Budget
      • For existing businesses, you use your last two to five years of financials for your research
      • For new businesses, you use the pro forma that was created as a part of your business plan
      • If you have neither, you use your best guess
      www.profitsplus.org
    • Budgeting Income
      • What has been the sales for each of the last three months of February?
      • What is your expectation for sales for this February?
      www.profitsplus.org
    • Budgeting gross margin
      • How are you buying?
      • Buying better without passing the savings to customers extends your margins
      • Remember this is maintained gross margin
      www.profitsplus.org
    • Budgeting “open to buy”
      • www.profitsplus.org
      • Meeting planners click here
      • Creating positive cashflow with an open to buy
      • Powerpoint and audio track
      • Free
      www.profitsplus.org
    • Budgeting Expenses
      • On a line by line basis, what do you expect?
      • Is payroll higher this year due to increased minimum wage, or pay increases, or being open more hours?
      • What about utilities?
      www.profitsplus.org
    • Budgeting net profit
      • Total all of the expenses to get your “total operating expenses”
      • Subtract the total operating expenses from gross profit to get your monthly net profit
      • Total your 12 monthly profits to get your budgeted net profit for this year
      www.profitsplus.org
    • Budgeted net profit
      • How did you do?
      • Is it worth the time and effort?
      • Consider what you paid yourself as a salary and the net profit
      www.profitsplus.org
    • The big question
      • While there may be the profit there at the end of the year, will there be the cash necessary to make this budget work?
      • More importantly, will there be enough cash for each of the 12 months?
      www.profitsplus.org
    • Cashflow
      • A budget that takes into consideration cash and any transaction involving cash.
      • The #1 management tool!
      www.profitsplus.org
    • Creating a cashflow chart
      • Begin with the cash on hand for the first day of the first month
      • Add the net profit from your projectionary budget for the first month
      • Add the cost of goods sold
      • Subtract any inventory purchases
      www.profitsplus.org
    • Creating a cashflow chart
      • Subtract any equipment purchases
      • Subtract any increase in receivables
      • Answer is your projected cash on hand for the last day of the month
      • This is also your projected cash on hand for the first day of the next month
      www.profitsplus.org
    • Creating a cashflow plan
      • www.profitsplus.org
      • Meeting planners click here
      • Black Ink: Cashflow management secrets your accountant never shared
      • Powerpoint and audio track
      • Free
      www.profitsplus.org
    • www.profitsplus.org
      • Visit our website to use the small business knowledge test, the small business financial knowledge test and 31 other calculators.
      www.profitsplus.org
    • A billion here, a billion there, pretty soon it adds up to real money! Senator Everett Dirksen www.profitsplus.org
    • Final Note www.profitsplus.org
      • This presentation will be specialized to your industry and your attendees’ specific needs.
      • For more information about having Tom present for you, contact us at (727)464-2182 or visit our website: www.profitsplus.org