Managing Your Business Finances Like a Pro

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BasicsIntroduction to Financial ManagementWhy Accounts are ImportantHands-on Practice Sessions Using Reports Managing Essential TasksAppendixTips and AdviceAppendix: Additional Concepts

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Managing Your Business Finances Like a Pro

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1. Managing Your Business Finances Like a Pro A Guide to the Essentials of QuickBooks Pro The following course covers the basics of financial management for your small business clients, and normally takes less than an hour to complete. We’ve included “talking points” but not a detailed script (we wanted to give instructors flexibility to present in the way that comes naturally and blend in their own perspectives and experience) Please feel free to expand, abbreviate or customize this course as you see fit. Course Introduction: A common goal among almost all small business owners is to maintain ownership and control of their business – the good news is research shows that people who take classes and continue to learn, are more likely to succeed, so you’re on the right path! Let’s get started. The following course covers the basics of financial management for your small business clients, and normally takes less than an hour to complete. We’ve included “talking points” but not a detailed script (we wanted to give instructors flexibility to present in the way that comes naturally and blend in their own perspectives and experience) Please feel free to expand, abbreviate or customize this course as you see fit. Course Introduction: A common goal among almost all small business owners is to maintain ownership and control of their business – the good news is research shows that people who take classes and continue to learn, are more likely to succeed, so you’re on the right path! Let’s get started.

2. Basics Introduction to Financial Management Why Accounts are Important Hands-on Practice Sessions Using Reports Managing Essential Tasks Appendix Tips and Advice Appendix: Additional Concepts & Terms Table of Contents Today we’ll cover: --What is Financial Management… and why do you need it? --What are accounts…and why do you need them as well? --Reports to understand how your business is doing – and make decisions for the future --A quick practice session, to put all you’ve learned into practice --Some tips and resources for getting started: Classes, online resources, and advisors who can help YOU manage YOUR business And then we have an appendix with additional concepts and terms, which we’ll get to as time permits. Today we’ll cover: --What is Financial Management… and why do you need it? --What are accounts…and why do you need them as well? --Reports to understand how your business is doing – and make decisions for the future --A quick practice session, to put all you’ve learned into practice --Some tips and resources for getting started: Classes, online resources, and advisors who can help YOU manage YOUR business And then we have an appendix with additional concepts and terms, which we’ll get to as time permits.

3. 1. What is Financial Management? What is Financial Management? Financial management is simply process of: Running your business (tasks you are already doing today) Accurately recording money coming in and out of business (you are probably already keeping track of this as well – so we’ll discuss how, as well as the possible benefits of a more systematic approach). Using reports to understand how your business is doing and make decisions What is Financial Management? Financial management is simply process of: Running your business (tasks you are already doing today) Accurately recording money coming in and out of business (you are probably already keeping track of this as well – so we’ll discuss how, as well as the possible benefits of a more systematic approach). Using reports to understand how your business is doing and make decisions

4. Six Ways Financial Management Helps Your Business Succeed Why take the time to learn and use financial management methods? Accounting is the language of business, so you and other parties (banks, IRS, etc.) should all speak the same language. Stay on top of your cash flow: Track money in and out of your business. Even a profitable business can go bankrupt if it doesn’t track cash flow. Manage your customers and sales: Track what they are buying, keep records up-to-date so you can contact them Production & Inventory: Know how to obtain goods and services from your vendors and establish credit Once your records are centralized, you can create reports for a variety of important activities: Filing with the IRS Understanding how your business is doing (this will help on pricing products and services) Sharing your financial picture with third parties (banks, SBA, etc.) to secure loans And then of course, tracking the money going in and out of your newly larger business. All companies, even huge established one’s with billions in revenue and tens of thousands of employees rely on financial management for these six areas. Whatever your business, sound financial practices are a toolset that can help you get the greatest return from your efforts. Why take the time to learn and use financial management methods? Accounting is the language of business, so you and other parties (banks, IRS, etc.) should all speak the same language. Stay on top of your cash flow: Track money in and out of your business. Even a profitable business can go bankrupt if it doesn’t track cash flow. Manage your customers and sales: Track what they are buying, keep records up-to-date so you can contact them Production & Inventory: Know how to obtain goods and services from your vendors and establish credit Once your records are centralized, you can create reports for a variety of important activities: Filing with the IRS Understanding how your business is doing (this will help on pricing products and services) Sharing your financial picture with third parties (banks, SBA, etc.) to secure loans And then of course, tracking the money going in and out of your newly larger business. All companies, even huge established one’s with billions in revenue and tens of thousands of employees rely on financial management for these six areas. Whatever your business, sound financial practices are a toolset that can help you get the greatest return from your efforts.

5. Information is Power Participation Question: What are the key questions you have about your business to help you know where your business stands? (Note: create list of things clients would like to know about their business.) There are certain questions all business owners would like answered. Businesses that practice sound financial management and record-keeping will have the answers to these questions (and more) at their fingertips. Participation Question: What are the key questions you have about your business to help you know where your business stands? (Note: create list of things clients would like to know about their business.) There are certain questions all business owners would like answered. Businesses that practice sound financial management and record-keeping will have the answers to these questions (and more) at their fingertips.

6. 2. Financial Accounts Why They Matter to Your Business Accurate record keeping lets you understand and use all your information Participation Questions: How do you currently keep track of your business? Sales and invoices? Customer and vendor lists? Bills and checks? What are some of the challenges you face with record-keeping today?Participation Questions: How do you currently keep track of your business? Sales and invoices? Customer and vendor lists? Bills and checks? What are some of the challenges you face with record-keeping today?

7. Cash Flow: Money In and Money Out Cash is King A healthy cash flow is critical to the viability of your business. The first step towards a positive cash flow is understanding your inflows and outflows: money in and money out. What does your business offer for sale? And then once your receive payment, what do you do with the money? Expenses. What type of products and services do you buy to keep your business running? Your money in from “sales” and money out from “expenses” create your cash flow. These are two main account categories. Cash is King A healthy cash flow is critical to the viability of your business. The first step towards a positive cash flow is understanding your inflows and outflows: money in and money out. What does your business offer for sale? And then once your receive payment, what do you do with the money? Expenses. What type of products and services do you buy to keep your business running? Your money in from “sales” and money out from “expenses” create your cash flow. These are two main account categories.

8. Cash Flow: Money In and Money Out Cash Flow Projection A good understanding of your cash flow activities will help you manage your business and its financial requirements. Use the information in your cash flow projection to: Anticipate and resolve cash shortages before they occur. Prepare for seasonal changes in your cash flow Compare the effects of increasing or decreasing cash receipts on your cash flow See how increasing or decreasing business expenses will affect your cash flow View the impact of unpaid bills and their due datesCash Flow Projection A good understanding of your cash flow activities will help you manage your business and its financial requirements. Use the information in your cash flow projection to: Anticipate and resolve cash shortages before they occur. Prepare for seasonal changes in your cash flow Compare the effects of increasing or decreasing cash receipts on your cash flow See how increasing or decreasing business expenses will affect your cash flow View the impact of unpaid bills and their due dates

9. Major Account Types Assets Current (cash, inventory, accounts receivable, etc.) Fixed (property, vehicles, machinery, etc.) Liabilities Current (within one year) Long Term Equity Contributed capital: owner’s investment Retained earnings (profits) There are five major account categories total. In addition to sales/income and expenses, the other major account types are assets, liabilities, and equity. Assets (what you have) = Liabilities (what you borrow/owe) + Equity (Net worth of your business, or assets minus liabilities) Assets Current (cash, inventory, accounts receivable, etc.) Fixed (property, vehicles, machinery, etc.) Liabilities Current (within one year) Long Term Equity Contributed Capital: What investors, stockholders, family members, partners, owners, etc. invest in the business Retained Earnings: The total cumulative net profit a business earns over its life, and not yet distributed Participation Question: Any questions? Now is a good time to ask! There are no bad questions. We’re all here to learn.There are five major account categories total. In addition to sales/income and expenses, the other major account types are assets, liabilities, and equity. Assets (what you have) = Liabilities (what you borrow/owe) + Equity (Net worth of your business, or assets minus liabilities) Assets Current (cash, inventory, accounts receivable, etc.) Fixed (property, vehicles, machinery, etc.) Liabilities Current (within one year) Long Term Equity Contributed Capital: What investors, stockholders, family members, partners, owners, etc. invest in the business Retained Earnings: The total cumulative net profit a business earns over its life, and not yet distributed Participation Question: Any questions? Now is a good time to ask! There are no bad questions. We’re all here to learn.

10. Categorize Your Transactions With a Chart of Accounts The master account list, or Chart of Accounts, contains all the different categories used to organize your transactions. Think of each subcategory as a file folder, divided by type (e.g., your expense accounts might include subfolders for advertising, car expenses, payroll, and office expenses). Quick Tip: Try to keep your Chart of Accounts as simple as possible w/o too many subcategories. Financial software programs like QuickBooks Simple Start can help you get started with a basic Chart of Accounts. The master account list, or Chart of Accounts, contains all the different categories used to organize your transactions. Think of each subcategory as a file folder, divided by type (e.g., your expense accounts might include subfolders for advertising, car expenses, payroll, and office expenses). Quick Tip: Try to keep your Chart of Accounts as simple as possible w/o too many subcategories. Financial software programs like QuickBooks Simple Start can help you get started with a basic Chart of Accounts.

11. Chart of Accounts: Your Master List of Accounts and Sub-Accounts Here’s a sample chart of accounts. Your accounts might differ slightly, but the accounts shown here cover the basic categories a business needs to properly record it’s transactions. Of the accounts listed above: Income comes from sales. Asset categories are: Accounts Receivable; Sales; Savings; Checking, Undeposited fund; etc. Expenses are extensive: advertising, car and truck expenses, commissions and fees, contract labor, etc. Assets are your bank accounts, cash on hand. Liability categories are mortgage, loans, payroll etc. and other current liabilities (sales tax payable). Equity categories are: Owner’s Capital, and Opening Balance Equity. Quick Tips: Avoid common mistakes: 1. Creating too many accounts 2. Setting up all accounts, including expense accounts, as bank accounts It is important to properly classify all transactions as the are entered – don’t classify anything as miscellaneous. It will take you much less time to classify accounts properly as they are entered than having to go back and reclassify later. We’ll come back to accounts later when we try a practice problem. Here’s a sample chart of accounts. Your accounts might differ slightly, but the accounts shown here cover the basic categories a business needs to properly record it’s transactions. Of the accounts listed above: Income comes from sales. Asset categories are: Accounts Receivable; Sales; Savings; Checking, Undeposited fund; etc. Expenses are extensive: advertising, car and truck expenses, commissions and fees, contract labor, etc. Assets are your bank accounts, cash on hand. Liability categories are mortgage, loans, payroll etc. and other current liabilities (sales tax payable). Equity categories are: Owner’s Capital, and Opening Balance Equity. Quick Tips: Avoid common mistakes: 1. Creating too many accounts 2. Setting up all accounts, including expense accounts, as bank accounts It is important to properly classify all transactions as the are entered – don’t classify anything as miscellaneous. It will take you much less time to classify accounts properly as they are entered than having to go back and reclassify later. We’ll come back to accounts later when we try a practice problem.

12. Chart of Accounts: Your Master List of Accounts and Sub-Accounts Here’s what your chart of accounts might look like in QuickBooks Pro. Here’s what your chart of accounts might look like in QuickBooks Pro.

13. Accounts: What We’ve Learned Consolidate your record keeping Use a standard set of accounts or categories to “file away” transactions—there is a common language Keep it simple: Significant accounts only So the five major account types are: sales, expenses, assets, liabilities and equity. These accounts, broken down into sub accounts, are used to classify your transactions. The master account list – a chart of accounts –includes all the different categories used to organize and “file” your transactions. There is a record-keeping category or account that relates to each of the questions we discussed earlier (slide #5). If you keep track of information using those accounts, you’ll be able to answer all the questions, without any extra work. How can you measure your profits are? (“Sales minus Expenses”) What category tells you what you’re business is worth? (“Equity”) Etc.So the five major account types are: sales, expenses, assets, liabilities and equity. These accounts, broken down into sub accounts, are used to classify your transactions. The master account list – a chart of accounts –includes all the different categories used to organize and “file” your transactions. There is a record-keeping category or account that relates to each of the questions we discussed earlier (slide #5). If you keep track of information using those accounts, you’ll be able to answer all the questions, without any extra work. How can you measure your profits are? (“Sales minus Expenses”) What category tells you what you’re business is worth? (“Equity”) Etc.

14. 3. Reports Understanding Your Business and Decision-Making Use reports as a planning tool Gain insight into your sales Income statement (P&L) shows your profitability Balance sheet shows assets, liabilities and equity Regularly monitor your profitability – and your cash flow If your business is a car – reports or financial statements are your dashboard. They allow you, as the business owner, the driver of the vehicle, to see how the systems are operating. Are you low on funds? Not earning a sufficient profit margin on your new product line? Reports will organize the information you’ve “filed” away to help you see where your business stands and keep your business running smoothly. If your business is a car – reports or financial statements are your dashboard. They allow you, as the business owner, the driver of the vehicle, to see how the systems are operating. Are you low on funds? Not earning a sufficient profit margin on your new product line? Reports will organize the information you’ve “filed” away to help you see where your business stands and keep your business running smoothly.

15. Make the Most of Your Reports Reports help you answer questions, such as which products are selling, who is buying, and who owes you money. Reports can also show you how your sales compare to a previous period. Three important sales reports are: Sales by Item, Sales by Customer, and A/R aging (Invoices that Haven’t been paid). Quick Tip: An “unpaid invoices” report, for example, can make collections easier and make sure no jobs or payments slip through the cracks. Reports help you answer questions, such as which products are selling, who is buying, and who owes you money. Reports can also show you how your sales compare to a previous period. Three important sales reports are: Sales by Item, Sales by Customer, and A/R aging (Invoices that Haven’t been paid). Quick Tip: An “unpaid invoices” report, for example, can make collections easier and make sure no jobs or payments slip through the cracks.

16. Income Statement Participation Question: Do you currently produce a “Profit and Loss” report or “Income Statement” at your business? Why or why not? The income statement reports how your business performed over a certain period of time. Income statement is also know as “Profit & Loss,” or “P&L” The income statement shows whether or not your business was profitable over a certain period of time (normally either a full year or a period of three months). Participation Question: Do you currently produce a “Profit and Loss” report or “Income Statement” at your business? Why or why not? The income statement reports how your business performed over a certain period of time. Income statement is also know as “Profit & Loss,” or “P&L” The income statement shows whether or not your business was profitable over a certain period of time (normally either a full year or a period of three months).

17. Balance Sheet A balance sheet is a snapshot of your business at a given moment in time. It shows all assets, liabilities and equity. “Current” assets and liabilities include those that have been incurred within a year. Participation Question: Do you currently produce a “balance sheet” report for your company? Why or why not? A balance sheet is a snapshot of your business at a given moment in time. It shows all assets, liabilities and equity. “Current” assets and liabilities include those that have been incurred within a year. Participation Question: Do you currently produce a “balance sheet” report for your company? Why or why not?

18. 4. Manage Essential Tasks Practice Sessions Money in Record a sale Invoice a customer Receive a payment Make a deposit Money Out Enter a Bill Pay a Bill Use Credit Card Write Check Pay Employees Reconciliation As a business owner, you need to understand the essential processes of tracking your money coming in and your money going out. Remember, your reports are only as good as your records! We’ll now walk through a few common accounting tasks, so you can get a feel for the how to categorize a transaction, as well as understanding of how the transactions impact the reports. “Hands-on” Option If students have computers they can try these tasks hands-on.As a business owner, you need to understand the essential processes of tracking your money coming in and your money going out. Remember, your reports are only as good as your records! We’ll now walk through a few common accounting tasks, so you can get a feel for the how to categorize a transaction, as well as understanding of how the transactions impact the reports. “Hands-on” Option If students have computers they can try these tasks hands-on.

19. A. Record a Sale Practice Session – Money In Money In: Record a Sale Participation Question: Before we begin the practice sessions, do you have any questions? If you’re unsure about any of the points we’ve discussed so far, let me know. We can talk it through, so you will feel more confident. [Begin Session] A sale is “money in.” When a customer pays in cash, what do you do? (Issue a sales receipt.) Participation Question: And what are the most important pieces of information you need to track about a sale? (Think about the sales receipts you get when you buy something in the store). “Hands-on” Option: Start up QuickBooks and open the file “sample service-based business.qbw” (included with the training resources available for download) Go to Customer Navigator and click on “Sales Receipts.” (Upon first use, you will be asked if you accept credit cards – click Yes.)Participation Question: Before we begin the practice sessions, do you have any questions? If you’re unsure about any of the points we’ve discussed so far, let me know. We can talk it through, so you will feel more confident. [Begin Session] A sale is “money in.” When a customer pays in cash, what do you do? (Issue a sales receipt.) Participation Question: And what are the most important pieces of information you need to track about a sale? (Think about the sales receipts you get when you buy something in the store). “Hands-on” Option: Start up QuickBooks and open the file “sample service-based business.qbw” (included with the training resources available for download) Go to Customer Navigator and click on “Sales Receipts.” (Upon first use, you will be asked if you accept credit cards – click Yes.)

20. A. Record a Sale Practice Session – Money In Quick Tip: Note that you record this “on-the-spot” transaction as a sales receipt, not an invoice. A common mistake is to record this type of transaction (on the spot sale) incorrectly. “Hands-on” Option: Enter the following information on the sales receipt. From the Customer:Job pull-down menu, select “Chapman, Natalie” as the customer. In this sample file, the Date defaults to “12/15/2007.” Leave that as it is. Select “Check” as the payment method. From the template drop-down menu, choose “Sales Receipt – Retail.” Click on the first line under “item”, and select “Pump” from the drop down menu. The price is filled in from the Inventory list. Enter quantity as “8.” Choose sales tax area “County – San Tomas.” “Save and Close”Quick Tip: Note that you record this “on-the-spot” transaction as a sales receipt, not an invoice. A common mistake is to record this type of transaction (on the spot sale) incorrectly. “Hands-on” Option: Enter the following information on the sales receipt. From the Customer:Job pull-down menu, select “Chapman, Natalie” as the customer. In this sample file, the Date defaults to “12/15/2007.” Leave that as it is. Select “Check” as the payment method. From the template drop-down menu, choose “Sales Receipt – Retail.” Click on the first line under “item”, and select “Pump” from the drop down menu. The price is filled in from the Inventory list. Enter quantity as “8.” Choose sales tax area “County – San Tomas.” “Save and Close”

21. A. Record a Sale Practice Session – Money In Participation Question: How would this sale affect your Profit and Loss report? “Hands-on” Option: From the Reports Navigator, click on “Company & Financial” then “Profit & Loss (income statement) Standard.” You’ll see that the Fountains & Garden Lighting income has risen by the amount we just recorded through the Sales Receipt process. To see the detail of each income line, double click on the amount. (You can see the recent sale to Natalie Chapman at the bottom of the list.)Participation Question: How would this sale affect your Profit and Loss report? “Hands-on” Option: From the Reports Navigator, click on “Company & Financial” then “Profit & Loss (income statement) Standard.” You’ll see that the Fountains & Garden Lighting income has risen by the amount we just recorded through the Sales Receipt process. To see the detail of each income line, double click on the amount. (You can see the recent sale to Natalie Chapman at the bottom of the list.)

22. B. Invoice a Customer Practice Session – Money In An invoice is a bill for payment later (compare to a sales receipt). “Hands-on” Option: Go to the Customer Navigator and click on “Invoices.” An invoice is a bill for payment later (compare to a sales receipt). “Hands-on” Option: Go to the Customer Navigator and click on “Invoices.”

23. B. Invoice a Customer Practice Session – Money In “Hands-on” Option: Enter the following information on the invoice. Select “Blackwell, Edward” as the customer. 2. Choose the invoice template that you want to use. In this case, let’s use the Landscaping Invoice. 3. Select the terms of payment “Net 30.” 4. Click on the first line under “Item” and choose “Sprkl pipes” from the drop down menu. Enter “8” as the quantity. 5. QuickBooks Pro has tax codes available which you can add to. Select “San Tomas” as the tax code for this customer. 6. You can print the invoice now, or choose to print or email the invoice later. 7. “Save & Close.”“Hands-on” Option: Enter the following information on the invoice. Select “Blackwell, Edward” as the customer. 2. Choose the invoice template that you want to use. In this case, let’s use the Landscaping Invoice. 3. Select the terms of payment “Net 30.” 4. Click on the first line under “Item” and choose “Sprkl pipes” from the drop down menu. Enter “8” as the quantity. 5. QuickBooks Pro has tax codes available which you can add to. Select “San Tomas” as the tax code for this customer. 6. You can print the invoice now, or choose to print or email the invoice later. 7. “Save & Close.”

24. B. Invoice a Customer Practice Session – Money In Participation Question: How would this sale affect your Profit and Loss report? What about your balance sheet? “Hands-on” Option: From the Reports Navigator, click on “Company & Financial” then “Profit & Loss (income statement) Standard.” You’ll see that the Sprinkler & Drip systems income has risen by the amount we just recorded through the Create Invoice process. To see the detail of each income line, double click on the amount. (You can see the recent invoice to Edward Blackwell at the bottom of the list.) From the Reports Navigator, click on “Company & Financial” then scroll down towards the bottom and click on “Balance Sheet & Net Worth – Standard.” You’ll see that the Total Accounts Receivable has also increased by the invoiced amount. Again, to see the detail behind any of the totals on this report, double-click the amount. Notice that the A/R line on your Balance Sheet increases.Participation Question: How would this sale affect your Profit and Loss report? What about your balance sheet? “Hands-on” Option: From the Reports Navigator, click on “Company & Financial” then “Profit & Loss (income statement) Standard.” You’ll see that the Sprinkler & Drip systems income has risen by the amount we just recorded through the Create Invoice process. To see the detail of each income line, double click on the amount. (You can see the recent invoice to Edward Blackwell at the bottom of the list.) From the Reports Navigator, click on “Company & Financial” then scroll down towards the bottom and click on “Balance Sheet & Net Worth – Standard.” You’ll see that the Total Accounts Receivable has also increased by the invoiced amount. Again, to see the detail behind any of the totals on this report, double-click the amount. Notice that the A/R line on your Balance Sheet increases.

25. C. Receive a Payment Practice Session – Money In A customer pays his invoice by check. You “receive” the payment against the outstanding invoice. “Hands-on” Option: Go to Customer Navigator and click on “Receive Payments.” A customer pays his invoice by check. You “receive” the payment against the outstanding invoice. “Hands-on” Option: Go to Customer Navigator and click on “Receive Payments.”

26. C. Receive a Payment Practice Session – Money In “Hands-on” Option: Enter the following information on the sales receipt. Select “Ecker Design” as the customer, enter the amount of “$3047.96” and select “Check” as the Payment Method. 2. The Date will default to 12/15/2007. Leave that as it is. 3. Select the first of the two invoices to apply this payment to by placing a checkmark in the left hand column. 4.“Save and Close” “Hands-on” Option: Enter the following information on the sales receipt. Select “Ecker Design” as the customer, enter the amount of “$3047.96” and select “Check” as the Payment Method. 2. The Date will default to 12/15/2007. Leave that as it is. 3. Select the first of the two invoices to apply this payment to by placing a checkmark in the left hand column. 4.“Save and Close”

27. C. Receive a Payment Practice Session – Money In Participation Question: How would this payment affect your Profit and Loss report? (no change) What about your balance sheet? Notice that the A/R line on your Balance Sheet decreases. Quick Tip: When you receive payments, don’t make the mistake of just “depositing” the money. It’s important to receive the payment against the outstanding invoice so you have an accurate view of how much customers owe you and who still owes you money. Participation Question: How would this payment affect your Profit and Loss report? (no change) What about your balance sheet? Notice that the A/R line on your Balance Sheet decreases. Quick Tip: When you receive payments, don’t make the mistake of just “depositing” the money. It’s important to receive the payment against the outstanding invoice so you have an accurate view of how much customers owe you and who still owes you money.

28. D. Make a Deposit Practice Session – Money In Now you are ready to go to the bank and deposit the money you have received. “Hands-on” Option: Go to Customer Navigator and click on “Deposits.” Now you are ready to go to the bank and deposit the money you have received. “Hands-on” Option: Go to Customer Navigator and click on “Deposits.”

29. D. Make a Deposit Practice Session – Money In Undeposited funds include payments from customers that are not yet in your bank account. “Hands-on” Option: You have 2 checks to deposit on this trip to the bank. Select “All Types” as the payment types. Place a checkmark next to each payment that you want to deposit. In this example, mark both the payment received from Natalie Chapman and payment from Ecker Design. Alternatively, you could “Select All” to select all payments to deposit by (click the button in the lower left portion of the screen.) 3. Click OK. Undeposited funds include payments from customers that are not yet in your bank account. “Hands-on” Option: You have 2 checks to deposit on this trip to the bank. Select “All Types” as the payment types. Place a checkmark next to each payment that you want to deposit. In this example, mark both the payment received from Natalie Chapman and payment from Ecker Design. Alternatively, you could “Select All” to select all payments to deposit by (click the button in the lower left portion of the screen.) 3. Click OK.

30. D. Make a Deposit Practice Session – Money In “Hands-on” Option: 4. In the “Make Deposits” window, select the account to which you want to deposit the payments. For this example, choose Checking. 5. If you wanted to get cash back from the deposit, you would fill In the Cash Back information at the bottom of the screen. 6. “Save & Close.” Make sure to note: just because the deposit has been entered into QuickBooks Pro does not mean that the money has physically been deposited into the back. Deposits must still be physically deposited to your banking account, either by going to the back or via online transfer.“Hands-on” Option: 4. In the “Make Deposits” window, select the account to which you want to deposit the payments. For this example, choose Checking. 5. If you wanted to get cash back from the deposit, you would fill In the Cash Back information at the bottom of the screen. 6. “Save & Close.” Make sure to note: just because the deposit has been entered into QuickBooks Pro does not mean that the money has physically been deposited into the back. Deposits must still be physically deposited to your banking account, either by going to the back or via online transfer.

31. D. Make a Deposit Practice Session – Money In Participation Question: How would this payment affect your Profit and Loss report? (no change) What about your balance sheet? Quick Tip: Your “profit and loss” in this case is not affected– you already recorded the sales when you issued your sales receipt and invoice.Participation Question: How would this payment affect your Profit and Loss report? (no change) What about your balance sheet? Quick Tip: Your “profit and loss” in this case is not affected– you already recorded the sales when you issued your sales receipt and invoice.

32. E. Enter a Bill Practice Session – Money Out Let’s say you’ve received your telephone bill in the mail. “Hands-on” Option: Go to the Vendor Navigator and click on “Enter Bills.”Let’s say you’ve received your telephone bill in the mail. “Hands-on” Option: Go to the Vendor Navigator and click on “Enter Bills.”

33. E. Enter a Bill Practice Session – Money Out “Hands-on” Option: Enter the following information on the check form: Select “Cal Telephone” as the Payee. 2. Enter the amount due as “$45.” 3. In this example the date received, date due and payment terms use a default setting. Leave them as they are for our training purposes, but note that you can change those as necessary. 3. Select “Utilities:Telephone” as the Expense Category (or account) to file this transaction under. If this bill were for items, you would select the “Items” tab and enter items in corresponding to the P.O. or add new items. 4. “Save and Close.” “Hands-on” Option: Enter the following information on the check form: Select “Cal Telephone” as the Payee. 2. Enter the amount due as “$45.” 3. In this example the date received, date due and payment terms use a default setting. Leave them as they are for our training purposes, but note that you can change those as necessary. 3. Select “Utilities:Telephone” as the Expense Category (or account) to file this transaction under. If this bill were for items, you would select the “Items” tab and enter items in corresponding to the P.O. or add new items. 4. “Save and Close.”

34. E. Enter a Bill Practice Session – Money Out Participation Question: How would this payment affect your Profit and Loss report? What about your balance sheet? Participation Question: How would this payment affect your Profit and Loss report? What about your balance sheet?

35. F. Pay Bills Practice Session – Money Out Let’s say you are going to pay some bills by check. “Hands-on” Option: Go to the Vendor Navigator and click “Pay Bills.” Let’s say you are going to pay some bills by check. “Hands-on” Option: Go to the Vendor Navigator and click “Pay Bills.”

36. F. Pay Bills Practice Session – Money Out “Hands-on” Option: In the “due on or before field” you can enter the due date for the bills you want to pay. Or you can opt to “Show all bills.” For this example, select “Show all bills.” 2. Place a checkmark next to the bills that you want to pay. Go ahead and check off Nolan Hardware for $610.00, and the two Cal Telephone bills at $45.00 each. 3. From the Payment information area, choose the Payment Account from which you wish to pay these bills (“Checking” for our purposes here) and the Payment Method (“Check”). 4. “Pay & Close.”“Hands-on” Option: In the “due on or before field” you can enter the due date for the bills you want to pay. Or you can opt to “Show all bills.” For this example, select “Show all bills.” 2. Place a checkmark next to the bills that you want to pay. Go ahead and check off Nolan Hardware for $610.00, and the two Cal Telephone bills at $45.00 each. 3. From the Payment information area, choose the Payment Account from which you wish to pay these bills (“Checking” for our purposes here) and the Payment Method (“Check”). 4. “Pay & Close.”

37. F. Pay Bills Practice Session – Money Out Participation Question: How would this payment affect your Profit and Loss report? What about your balance sheet? Quick Tip: Your “profit and loss” in this case is not affected– you already recorded the expense when you entered the bills. Individual transactions may not make that large a difference on financial statements, but all together these reports are powerful in helping you see where you business stands.Participation Question: How would this payment affect your Profit and Loss report? What about your balance sheet? Quick Tip: Your “profit and loss” in this case is not affected– you already recorded the expense when you entered the bills. Individual transactions may not make that large a difference on financial statements, but all together these reports are powerful in helping you see where you business stands.

38. G. Use Credit Card Practice Session – Money Out Let’s say you are going to buy gasoline for your company’s truck with a credit card. “Hands-on” Option: Go to the Banking Navigator and click on “Credit Card Charges.” Let’s say you are going to buy gasoline for your company’s truck with a credit card. “Hands-on” Option: Go to the Banking Navigator and click on “Credit Card Charges.”

39. G. Use Credit Card Practice Session – Money Out “Hands-on” Option: 1. Select the credit card that you used to purchase the fuel, “CalOil Card.” 2. In the “Purchased From” field, use the drop down menu to select the Vendor name: “CalOil Company.” 3. Enter “$54.25” as the amount of the purchase. 4. Click on the first line under Account and use the drop down menu to assign this expense to “Automobile:Fuel.” 5. “Save & Close” “Hands-on” Option: 1. Select the credit card that you used to purchase the fuel, “CalOil Card.” 2. In the “Purchased From” field, use the drop down menu to select the Vendor name: “CalOil Company.” 3. Enter “$54.25” as the amount of the purchase. 4. Click on the first line under Account and use the drop down menu to assign this expense to “Automobile:Fuel.” 5. “Save & Close”

40. G. Use Credit Card Practice Session – Money Out Balance Sheet: Increases your “Credit Card” liability and decrease “Equity.” When you eventually pay the credit card bill, you’ll decrease Liabilities and Assets (checking). By using credit cards, you are actually spending the money as soon as you make the charge. Your credit card company is just paying the bill for you and allowing your business to pay back later. Quick Tip: Many business choose to enter their credit card transactions several at a time, when they receive their monthly statement.Balance Sheet: Increases your “Credit Card” liability and decrease “Equity.” When you eventually pay the credit card bill, you’ll decrease Liabilities and Assets (checking). By using credit cards, you are actually spending the money as soon as you make the charge. Your credit card company is just paying the bill for you and allowing your business to pay back later. Quick Tip: Many business choose to enter their credit card transactions several at a time, when they receive their monthly statement.

41. H. Write a Check Practice Session – Money Out You decide that you need new plants for your corporate office. You go to the local nursery and write a check for those items. “Hands-on” Option: Click on “Record Expense” to create a “Credit” transaction. Quick Tip: Writing a check is different from paying a bill! QuickBooks Pro allows you to enter a bill and pay for it at a later time. Writing a check will affect your Savings/Checking account immediately. You decide that you need new plants for your corporate office. You go to the local nursery and write a check for those items. “Hands-on” Option: Click on “Record Expense” to create a “Credit” transaction. Quick Tip: Writing a check is different from paying a bill! QuickBooks Pro allows you to enter a bill and pay for it at a later time. Writing a check will affect your Savings/Checking account immediately.

42. H. Write a Check Practice Session – Money Out “Hands-on” Option: In the “Bank Account” field, choose the account from which you want to write the check: “Checking.” Fill in the check portion of the screen as you would a paper check. In “Pay to the Order of,” choose the name of the Payee “Middlefield Nursery” and enter $300 for the amount of the check. In the first line under the Expenses tab, itemize this expense as “Job Expenses:Job Materials:Plants&Sod.” If you were purchasing these items for your inventory, you would use the “Items” tab to enter the items purchased. Print check. “Save & Close.”“Hands-on” Option: In the “Bank Account” field, choose the account from which you want to write the check: “Checking.” Fill in the check portion of the screen as you would a paper check. In “Pay to the Order of,” choose the name of the Payee “Middlefield Nursery” and enter $300 for the amount of the check. In the first line under the Expenses tab, itemize this expense as “Job Expenses:Job Materials:Plants&Sod.” If you were purchasing these items for your inventory, you would use the “Items” tab to enter the items purchased. Print check. “Save & Close.”

43. H. Write a Check Practice Session – Money Out Participation Question: How would this payment affect your Profit and Loss report? (expense) What about your balance sheet? Participation Question: How would this payment affect your Profit and Loss report? (expense) What about your balance sheet?

44. I. Pay Employees Practice Session – Money Out It’s time to pay your employees. “Hands-on” Option: Go to the Employee Navigator and click on Pay Employees. It’s time to pay your employees. “Hands-on” Option: Go to the Employee Navigator and click on Pay Employees.

45. I. Pay Employees Practice Session – Money Out “Hands-on” Option: Choose the account from which you want to issue payments to your employees. In this case, choose “Checking.”. You have the option of printing, handwriting or directly depositing the checks. Choose “To be printed.” Place a checkmark next to each employee that you want to pay. For our purposes here, select all 3 employees. There are radio buttons in the upper middle section of the screen. If you want to preview or modify the paychecks, which is what we will be doing in this example, click “Enter hours and preview check before creating.” If you don't want to preview the paychecks, click “Create check without preview using hours below and last quantities.” The third option shown is “Enter hours using Rapid Time Entry,” an add-on service available by subscription to QuickBooks Enhanced Payroll Rapid Time Entry permitting entry of hours worked for a group of employees without directly editing each paycheck. Click Create. Because we wanted to preview each paycheck, that paycheck detail for all three employees is now presented sequentially. Click Create after each preview. Print Paychecks. “Hands-on” Option: Choose the account from which you want to issue payments to your employees. In this case, choose “Checking.”. You have the option of printing, handwriting or directly depositing the checks. Choose “To be printed.” Place a checkmark next to each employee that you want to pay. For our purposes here, select all 3 employees. There are radio buttons in the upper middle section of the screen. If you want to preview or modify the paychecks, which is what we will be doing in this example, click “Enter hours and preview check before creating.” If you don't want to preview the paychecks, click “Create check without preview using hours below and last quantities.” The third option shown is “Enter hours using Rapid Time Entry,” an add-on service available by subscription to QuickBooks Enhanced Payroll Rapid Time Entry permitting entry of hours worked for a group of employees without directly editing each paycheck. Click Create. Because we wanted to preview each paycheck, that paycheck detail for all three employees is now presented sequentially. Click Create after each preview. Print Paychecks.

46. I. Pay Employees Practice Session – Money Out Participation Question: How would this payment affect your Profit and Loss report? (expense) What about your balance sheet? Participation Question: How would this payment affect your Profit and Loss report? (expense) What about your balance sheet?

47. Reconcile Your Accounts Practice Session – Reconciliation It’s the end of the month and your bank statement has arrived. “Hands-on” Option: Go to Banking Navigator and click on Reconcile. It’s the end of the month and your bank statement has arrived. “Hands-on” Option: Go to Banking Navigator and click on Reconcile.

48. Reconcile Your Accounts Practice Session – Reconciliation “Hands-on” Option: You’ll be presented with a screen for beginning your reconciliation. Select the account to reconcile. Choose “Checking.” Enter the ending balance from your bank statement. In this example, go ahead and enter “30,382.43.” Enter any additional interest and service charges. Just leave these fields blank for now. Click Continue.“Hands-on” Option: You’ll be presented with a screen for beginning your reconciliation. Select the account to reconcile. Choose “Checking.” Enter the ending balance from your bank statement. In this example, go ahead and enter “30,382.43.” Enter any additional interest and service charges. Just leave these fields blank for now. Click Continue.

49. Reconcile Your Accounts Practice Session – Reconciliation “Hands-on” Option: Place checkmarks next to the debits and credits that are shown on your bank statement, which designates them as “cleared.” In this example, since we do not have an actual bank statement to reconcile, we have placed checkmarks next to every check written through April 2007 (through 4/21/2007 - Shane B. Hamby - $1602.02), and next to credits through December 10th (through 12/10/2007 - Balak, Mike:Residential - $509.28). Click “Reconcile Now.” In this example your banking statement balance and your QuickBooks statement have reconciled. We know this because the “Difference” in the lower right hand corner is “$0.00.” In event of a discrepancy, you will be given the following additional options after clicking Reconcile Now: Click Return to Reconcile so that you can correct it, or Click Leave Reconcile. Your changes will not be lost and you can complete the Reconciliation Process later, or Click Enter Adjustment to create an adjusted entry for this account. Choose this option only if you have attempted to correct all errors. We recommend choosing to return to Reconcile and correcting any errors. If you cannot find the source of the discrepancy, you can click “Enter Adjustment” and your QuickBooks Pro account will add an adjustment to reconcile to your bank statement. “Hands-on” Option: Place checkmarks next to the debits and credits that are shown on your bank statement, which designates them as “cleared.” In this example, since we do not have an actual bank statement to reconcile, we have placed checkmarks next to every check written through April 2007 (through 4/21/2007 - Shane B. Hamby - $1602.02), and next to credits through December 10th (through 12/10/2007 - Balak, Mike:Residential - $509.28). Click “Reconcile Now.” In this example your banking statement balance and your QuickBooks statement have reconciled. We know this because the “Difference” in the lower right hand corner is “$0.00.” In event of a discrepancy, you will be given the following additional options after clicking Reconcile Now: Click Return to Reconcile so that you can correct it, or Click Leave Reconcile. Your changes will not be lost and you can complete the Reconciliation Process later, or Click Enter Adjustment to create an adjusted entry for this account. Choose this option only if you have attempted to correct all errors. We recommend choosing to return to Reconcile and correcting any errors. If you cannot find the source of the discrepancy, you can click “Enter Adjustment” and your QuickBooks Pro account will add an adjustment to reconcile to your bank statement.

50. Reconcile Your Accounts Practice Session – Reconciliation After reconciliation, QuickBooks will offer you reports of the Reconciliation Summary and Reconciliation Detail. 8. Total Cleared transactions reflects the total of all the debits and credits that we placed checkmarks to while going through the reconciliation process; those debits and credits that would be listed on your bank statement. 9. Total Uncleared Transactions reflects those debits and credits that are recorded in QuickBooks Pro but have not yet appeared on your bank statement for whatever reason. Sometimes these transactions are referred to as “pending.” 10. The Ending Balance is the total of the cleared transactions and the uncleared transactions. Uh-oh… you better get to work.After reconciliation, QuickBooks will offer you reports of the Reconciliation Summary and Reconciliation Detail. 8. Total Cleared transactions reflects the total of all the debits and credits that we placed checkmarks to while going through the reconciliation process; those debits and credits that would be listed on your bank statement. 9. Total Uncleared Transactions reflects those debits and credits that are recorded in QuickBooks Pro but have not yet appeared on your bank statement for whatever reason. Sometimes these transactions are referred to as “pending.” 10. The Ending Balance is the total of the cleared transactions and the uncleared transactions. Uh-oh… you better get to work.

51. 5. Tips and Advice Getting Started Budgeting Customization Integration Congratulations! Now it’s time to get started using what you’ve learned and also find out about where you can get help if you need it. Now it’s time to get started using what you’ve learned and also find out about where you can get help if you need it.

52. Getting Started Talk to Your Accountant Buy and Install QuickBooks Pro Structure your accounts Start with a minimum # of accounts and add as needed Establish an accounting routine – and stick to it Reconcile accounts monthly Update financial statements quarterly Work Closely with Your Accountant throughout the Year Good accounting habits: 1. Record transactions regularly: Buying/Expenses: bills, checks, credit, paying employees, contractors Selling: estimates, invoices, sales receipts, collections Purchasing: Managing and adjusting inventory Credit card transactions (don’t forget these) 2. Accuracy and consistency are essential Don’t classify many items as “miscellaneous” 3. Fix mistakes as they happen Everyone makes mistakes, and they can be fixed. 4. Manage and reconcile bank account regularly Always make sure your bank account records are up-to-dateGood accounting habits: 1. Record transactions regularly: Buying/Expenses: bills, checks, credit, paying employees, contractors Selling: estimates, invoices, sales receipts, collections Purchasing: Managing and adjusting inventory Credit card transactions (don’t forget these) 2. Accuracy and consistency are essential Don’t classify many items as “miscellaneous” 3. Fix mistakes as they happen Everyone makes mistakes, and they can be fixed. 4. Manage and reconcile bank account regularly Always make sure your bank account records are up-to-date

53. Budgeting QuickBooks allows you to easily create fiscal year budgets for Profit and Loss or Balance Sheet accounts. How many budgets can a business create? For each account, customer or job, and class combination, you can create one budget per fiscal year. For example, if you create a 2005 budget for lumber (an expense account) for the Jones remodel (a job for your customer Jones), you cannot create a second 2005 budget for lumber on the Jones remodel. You can create as many separate budgets as you want within the same fiscal year as long as each budget applies to something different. For example, it's okay to have a 2005 budget for lumber for the Jones remodel and a 2005 budget for lumber on the Smith remodel (the Jones and Smith remodels are different customer:job combinations). To get started: From the Company menu in QuickBooks, choose Planning and Budgeting, then Set Up Budgets. How many budgets can a business create? For each account, customer or job, and class combination, you can create one budget per fiscal year. For example, if you create a 2005 budget for lumber (an expense account) for the Jones remodel (a job for your customer Jones), you cannot create a second 2005 budget for lumber on the Jones remodel. You can create as many separate budgets as you want within the same fiscal year as long as each budget applies to something different. For example, it's okay to have a 2005 budget for lumber for the Jones remodel and a 2005 budget for lumber on the Smith remodel (the Jones and Smith remodels are different customer:job combinations). To get started: From the Company menu in QuickBooks, choose Planning and Budgeting, then Set Up Budgets.

54. Customizing Forms in QuickBooks What you can do from the Customize forms window in QuickBooks: Change the form's title Add or remove fields Add or remove columns Arrange columns in a different order Change the title of a field or column Change the fonts used on the form Print your company name and address Add your company logo to the form Customize the header on a form Customize the footer on a form Add free-form text What you can do from the Customize forms window in QuickBooks: Change the form's title Add or remove fields Add or remove columns Arrange columns in a different order Change the title of a field or column Change the fonts used on the form Print your company name and address Add your company logo to the form Customize the header on a form Customize the footer on a form Add free-form text

55. Customizing QuickBooks There are a number of things that you can customize that affect the behavior of QuickBooks. “My Preferences” changes the look, feel and behavior of your personal usage of QuickBooks. For example, Desktop View allows you to choose to view a single window at a time, or make those windows cascade for multiple views. Under Reminders, you can choose to see a “to-do” list every time you open up the company file. Under Spelling, you can choose to check spelling before sending messages or invoices from QuickBooks to your clients. “Company Preferences” affects the look, feel and behavior of users throughout the company. For example, under Payroll & Employees, as an administrator you can set default behaviors to automatically fill in the previous amount from paycheck to paycheck for each employee. Under Purchases and Vendors you can choose to be warned if a PO number is being duplicated. Under Reports and Graphs you can choose to see summary reports on a Cash basis or on an Accrual basis. These are just a few examples of the flexibility QuickBooks allows you as the user. Explore your Preferences menu to set defaults and preferences to what is right for you. There are a number of things that you can customize that affect the behavior of QuickBooks. “My Preferences” changes the look, feel and behavior of your personal usage of QuickBooks. For example, Desktop View allows you to choose to view a single window at a time, or make those windows cascade for multiple views. Under Reminders, you can choose to see a “to-do” list every time you open up the company file. Under Spelling, you can choose to check spelling before sending messages or invoices from QuickBooks to your clients. “Company Preferences” affects the look, feel and behavior of users throughout the company. For example, under Payroll & Employees, as an administrator you can set default behaviors to automatically fill in the previous amount from paycheck to paycheck for each employee. Under Purchases and Vendors you can choose to be warned if a PO number is being duplicated. Under Reports and Graphs you can choose to see summary reports on a Cash basis or on an Accrual basis. These are just a few examples of the flexibility QuickBooks allows you as the user. Explore your Preferences menu to set defaults and preferences to what is right for you.

56. Integration Synchronize with contact management database Export information into Microsoft Word to write letters to your customer base Import existing data from Microsoft Excel QuickBooks is compatible with a number of products, which are each sold separately: If you want to synchronize with contact management software, you need either: Microsoft Outlook 98, 2000, 2002 or 2003, or Symantec ACT! Version 3.08, 4.02 or Interact 2000. To use features that integrate with Microsoft, such as Write Letters or Export Reports, you need Microsoft Word 2000, 2002 or 2003, or Microsoft Excel 2000, 2002 or 2003. QuickBooks Pro is also compatible with QuickBooks Customer Manager v1.0 and v2.0, QuickBooks Client Manager v1.0 and v2.0 (Basic, Pro and Premier), and QuickBooks Point-of-Sale 4.0. The Business Planner functionality requires Adobe Acrobat 5.0 or 6.0. Payroll and online features/services require Internet access with at least 56 Kbps connection speed. QuickBooks is compatible with a number of products, which are each sold separately: If you want to synchronize with contact management software, you need either: Microsoft Outlook 98, 2000, 2002 or 2003, or Symantec ACT! Version 3.08, 4.02 or Interact 2000. To use features that integrate with Microsoft, such as Write Letters or Export Reports, you need Microsoft Word 2000, 2002 or 2003, or Microsoft Excel 2000, 2002 or 2003. QuickBooks Pro is also compatible with QuickBooks Customer Manager v1.0 and v2.0, QuickBooks Client Manager v1.0 and v2.0 (Basic, Pro and Premier), and QuickBooks Point-of-Sale 4.0. The Business Planner functionality requires Adobe Acrobat 5.0 or 6.0. Payroll and online features/services require Internet access with at least 56 Kbps connection speed.

57. Congratulations! You now know: Why financial management is critical to effectively run a business How to set-up and manage your accounts The usefulness of financial reports How to apply financial basics into QuickBooks Pro

58. Appendix: Additional Terms and Concepts Managing Your Business Finances Like a Pro

59. Business types Cash or accrual Debits and credits Journal Ledger Financial Management Terms and Concepts We’ve taught you the basics to get started with good record-keeping. There is always more to learn. Here are a few terms and concepts you may run across as your grow your business. We’ve taught you the basics to get started with good record-keeping. There is always more to learn. Here are a few terms and concepts you may run across as your grow your business.

60. Determine Your Business Type A study by Kauffmann Foundation suggests that the number of new businesses may even be as high as 2.5 million. This larger audience may not be incorporated or registered. Each type of business structure has advantages/disadvantages. Your tax accountant or other business advisor may be able to recommend which structure is best for your business. A study by Kauffmann Foundation suggests that the number of new businesses may even be as high as 2.5 million. This larger audience may not be incorporated or registered. Each type of business structure has advantages/disadvantages. Your tax accountant or other business advisor may be able to recommend which structure is best for your business.

61. Choosing an Accounting Type You need to understand the difference between these two methods of accounting so you’ll know what to declare for tax purposes. You may need to consult a business advisor or accountant to determine the correct method of reporting for your business. The IRS requires businesses with inventory (e.g. retailers) to use the accrual method of accounting. You need to understand the difference between these two methods of accounting so you’ll know what to declare for tax purposes. You may need to consult a business advisor or accountant to determine the correct method of reporting for your business. The IRS requires businesses with inventory (e.g. retailers) to use the accrual method of accounting.

63. Larry’s Landscaping & Garden Supply: Journal Journal entries capture all cash in and cash out activity, plus adjusting entries such as recording depreciations, record accruals (such as adding to AP or AR, or a loan payable) etc. They really capture the "back end" accounting transactions of everything you do. In addition, the accountant can make entries to adjust the books for accuracy and correctness each month, or whenever it is necessary (for example at tax time). Journal entries capture all cash in and cash out activity, plus adjusting entries such as recording depreciations, record accruals (such as adding to AP or AR, or a loan payable) etc. They really capture the "back end" accounting transactions of everything you do. In addition, the accountant can make entries to adjust the books for accuracy and correctness each month, or whenever it is necessary (for example at tax time).

64. Larry’s Landscaping & Garden Supply: General Ledger

65. For More Information Your accountant is available for questions, concerns and review. Be sure to fill in your contact information on this slide!Be sure to fill in your contact information on this slide!

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