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A Simple Start to Managing Your Business Finances

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A Simple Start to Managing Your Business Finances

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    1. A Simple Start to Managing Your Business Finances A Guide to the Essentials 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. Introduction to Financial Management Why Accounts are Important Using Reports Managing Essential Tasks: Practice Session Tips and Resources Appendix: Additional Concepts & Terms Financial Management Essentials 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. 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 (what you own) 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 (what you own) 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.

    9. 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.

    10. 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. To help you with your chart of account categories, you may want to have an expert consultation (FREE!) with an SBDC counselor or QuickBooks ProAdvisor (more details at end of presentation) 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. To help you with your chart of account categories, you may want to have an expert consultation (FREE!) with an SBDC counselor or QuickBooks ProAdvisor (more details at end of presentation) We’ll come back to accounts later when we try a practice problem.

    11. 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.

    12. 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.

    13. 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.

    14. 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).

    15. 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?

    16. 4. Manage Essential Tasks Practice Session: Mark’s Atomic Graphic Designs Money in Record a sale Invoice a customer Receive a payment Make a deposit Money Out E. Write a check / record an expense F. Use a credit card / record an expense 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 6 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. Before class, go to “File/Maintenance/Restore” and load the file “Training_file.qbb” (included with the training resources available for download) 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 6 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. Before class, go to “File/Maintenance/Restore” and load the file “Training_file.qbb” (included with the training resources available for download)

    17. 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: Go to “File/Maintenance/Restore” and load the file “Training_file.qbb” (included with the training resources available for download) Click on “Sales Receipts” and Create a “New” receipt.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: Go to “File/Maintenance/Restore” and load the file “Training_file.qbb” (included with the training resources available for download) Click on “Sales Receipts” and Create a “New” receipt.

    18. A. Record a Sale Practice Session – Money In Track Your Business 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. Select “Cristina Andres” as the customer. Under “item”, select “Add New” and type in “Business Cards.” Make the price “$200” (notice that the account is “sales”) Enter “1” as the quantity Enter “Cash” as the payment method. “Keep 12/15/2007 as the date.” “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. Select “Cristina Andres” as the customer. Under “item”, select “Add New” and type in “Business Cards.” Make the price “$200” (notice that the account is “sales”) Enter “1” as the quantity Enter “Cash” as the payment method. “Keep 12/15/2007 as the date.” “Save and Close”

    19. A. Record a Sale Practice Session – Money In See Where Your Business Stands Participation Question: How would this sale affect your Profit and Loss report? “Hands-on” Option: From the Home-Page, click on “Profit and Loss” Report in the middle of the screen. Click on the “Sales” to drill down deeper to see all the company’s sales in that time period. (You can see the recent sale to Cristina Andres at the bottom of the list.) Participation Question: How would this sale affect your Profit and Loss report? “Hands-on” Option: From the Home-Page, click on “Profit and Loss” Report in the middle of the screen. Click on the “Sales” to drill down deeper to see all the company’s sales in that time period. (You can see the recent sale to Cristina Andres at the bottom of the list.)

    20. B. Invoice a Customer Practice Session – Money In Money In: Invoice Customer An invoice is a bill for payment later (compare to a sales receipt). “Hands-on” Option: Click on “Invoices” and Create a “New” invoice. An invoice is a bill for payment later (compare to a sales receipt). “Hands-on” Option: Click on “Invoices” and Create a “New” invoice.

    21. B. Invoice a Customer Practice Session – Money In Track Your Business “Hands-on” Option: Enter the following information on the sales receipt. Select “Senna Computers” as the customer. 2. Enter “Graphic Design” is the item purchased. 3. Enter “2” as the quantity. 4. The terms are “Net 60” 5. The date is “12/15/2007” 6.“Save and Close” “Hands-on” Option: Enter the following information on the sales receipt. Select “Senna Computers” as the customer. 2. Enter “Graphic Design” is the item purchased. 3. Enter “2” as the quantity. 4. The terms are “Net 60” 5. The date is “12/15/2007” 6.“Save and Close”

    22. B. Invoice a Customer Practice Session – Money In See Where Your Business Stands Participation Question: How would this sale affect your Profit and Loss report? What about your balance sheet? 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? Notice that the A/R line on your Balance Sheet increases.

    23. C. Receive a Payment Practice Session – Money In Money In: Receive Payment Senna Computers pays you for the graphic design services. So you “receive” the payment against the outstanding invoice. “Hands-on” Option: Click on “Receive Payments” to Receive a “New” payment. Senna Computers pays you for the graphic design services. So you “receive” the payment against the outstanding invoice. “Hands-on” Option: Click on “Receive Payments” to Receive a “New” payment.

    24. C. Receive a Payment Practice Session – Money In Track Your Business “Hands-on” Option: Enter the following information on the sales receipt. Select “Senna Computers” as the customer. 2. Enter “Check” as the Payment Method. 3. Enter “$90” as the Payment Amount. (You’ll notice that the invoicing you created for Senna computers shows up on screen—this is the invoice you will credit) 4.“Save and Close” “Hands-on” Option: Enter the following information on the sales receipt. Select “Senna Computers” as the customer. 2. Enter “Check” as the Payment Method. 3. Enter “$90” as the Payment Amount. (You’ll notice that the invoicing you created for Senna computers shows up on screen—this is the invoice you will credit) 4.“Save and Close”

    25. C. Receive a Payment Practice Session – Money In See Where Your Business Stands 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.

    26. D. Make a Deposit Practice Session – Money In Money In: Make a Deposit Now you are ready to go to the bank and deposit the money you have received. “Hands-on” Option: Click on “Deposits” to make a “New” deposit. Now you are ready to go to the bank and deposit the money you have received. “Hands-on” Option: Click on “Deposits” to make a “New” deposit.

    27. D. Make a Deposit Practice Session – Money In Track Your Business Undeposited funds include payments from customers that are not yet in your bank account. “Hands-on” Option: You deposit several checks on this trip to the bank. You’ll notice the recent payment from “Senna Computers” is at the bottom of the list. Select “Check and Cash” as the payment types “Select All” to select all checks and cash to deposit by (click the button in the lower left portion of the screen.) 3.“Save and Close” Undeposited funds include payments from customers that are not yet in your bank account. “Hands-on” Option: You deposit several checks on this trip to the bank. You’ll notice the recent payment from “Senna Computers” is at the bottom of the list. Select “Check and Cash” as the payment types “Select All” to select all checks and cash to deposit by (click the button in the lower left portion of the screen.) 3.“Save and Close”

    28. D. Make a Deposit Practice Session – Money In See Where Your Business Stands 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.

    29. E. Write a Check / Record an Expense Practice Session – Money Out Money Out: Write a Check Let’s say you are going to pay a telephone bill by check. “Hands-on” Option: Click on “Write Check” to create a “New” check. Let’s say you are going to pay a telephone bill by check. “Hands-on” Option: Click on “Write Check” to create a “New” check.

    30. Track Your Business E. Write a Check / Record an Expense Practice Session – Money Out “Hands-on” Option: Enter the following information on the check form: Select “Cal Telephone” as the Payee. 2. Your regular payment comes up as “$45” 3. Select “Utilities” as the Expense Category (or account) to file this transaction under. 4. “Save and Close.” “Hands-on” Option: Enter the following information on the check form: Select “Cal Telephone” as the Payee. 2. Your regular payment comes up as “$45” 3. Select “Utilities” as the Expense Category (or account) to file this transaction under. 4. “Save and Close.”

    31. E. Write a Check / Record an Expense Practice Session – Money Out See Where Your Business Stands Participation Question: How would this payment affect your Profit and Loss report? (expense) What about your balance sheet? Quick Tip: Individual transaction 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? (expense) What about your balance sheet? Quick Tip: Individual transaction 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.

    32. F. Use Credit Card / Record an Expense Practice Session – Money Out Money Out: Use a Credit Card Let’s say you are going to buy office supplies with a credit card. “Hands-on” Option: Click on “Record Expense” to create a “Credit” transaction. Let’s say you are going to buy office supplies with a credit card. “Hands-on” Option: Click on “Record Expense” to create a “Credit” transaction.

    33. Track Your Business F. Use Credit Card / Record an Expense Practice Session – Money Out “Hands-on” Option: Enter the following information on the check form: Select “Burge Hardware and Supplies” as the Payee. 2. Select “Supplies” as the expense account or category. 4. Enter “$95” as the amount. 5. “Record” the transaction “Hands-on” Option: Enter the following information on the check form: Select “Burge Hardware and Supplies” as the Payee. 2. Select “Supplies” as the expense account or category. 4. Enter “$95” as the amount. 5. “Record” the transaction

    34. F. Use Credit Card / Record an Expense Practice Session – Money Out See Where Your Business Stands 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.

    35. 6. Tips and Advice Getting Started Helpful Resources Online Resources 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.

    36. Getting Started Build your toolkit Consider software packages such as QuickBooks Simple Start (Trial Edition is available) 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 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

    37. Helpful Resources Advance Your Knowledge Professional Help Accountants Look for knowledge of your industry QuickBooks ProAdvisors Expert set-up can save you time Free 1-hour consultation Small Business Development Center (SBDC) counselors Training Tools Take classes (either online or at local colleges) QuickBooks Learning Solutions (look under “Training” at www.QuickBooks.com) Help is available! You don’t need to go this alone. Class and coaching are a recipe for success. A Kauffmann Foundation study shows that business owners who take classes—particularly 3 or more classes—are significantly more likely to succeed. Don’t be afraid to seek professional help. A Small Business Development Center advisor or an accounting professional can help you review your Chart of Accounts. SBDCs offer free counseling and low-cost training Many QuickBooks Pro-Advisors offer 1 hour of free consultation to get business started on the right track Help is available! You don’t need to go this alone. Class and coaching are a recipe for success. A Kauffmann Foundation study shows that business owners who take classes—particularly 3 or more classes—are significantly more likely to succeed. Don’t be afraid to seek professional help. A Small Business Development Center advisor or an accounting professional can help you review your Chart of Accounts. SBDCs offer free counseling and low-cost training Many QuickBooks Pro-Advisors offer 1 hour of free consultation to get business started on the right track

    38. Online Resources Small Business Development Centers www.sba.gov/sbdc/ sbdcnear.html Internal Revenue Service www.irs.gov/businesses/small/ U.S. Chamber of Commerce www.uschamber.com QuickBooks Financial Software www.quickbooks.com Find a Certified QuickBooks ProAdvisor www.usequickbooks.com/locateadvisor) The SBA site offers news, online finance and management resources as well as links to local SBA offices. The IRS site is a good resource for what you’ll need to know for all taxation issues. Includes forms and other resources. The U.S. Chamber of Commerce site can help you locate a local Chamber of Commerce. And the Intuit QuickBooks site lets you evaluate if QuickBooks is the right tool for your financial management needs. The SBA site offers news, online finance and management resources as well as links to local SBA offices. The IRS site is a good resource for what you’ll need to know for all taxation issues. Includes forms and other resources. The U.S. Chamber of Commerce site can help you locate a local Chamber of Commerce. And the Intuit QuickBooks site lets you evaluate if QuickBooks is the right tool for your financial management needs.

    39. 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

    40. Appendix: Additional Terms and Concepts A Simple Start to Managing Your Business Finances

    41. 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.

    42. 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.

    43. 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.

    45. Mark’s Atomic Graphic Design: Journal

    46. Mark’s Atomic Graphic Design: General Ledger

    47. Intuit would like to thank the following advisors for their help developing this presentation: Peter Pappas, Regional Director, Connecticut Small Business Development Center, Groton, CT Neal Nelson, Counselor, Maricopa Community College Small Business Development Center, Phoenix, AZ Charles Eason, Director, Solano College Small Business Development Center, Fairfield, CA Acknowledgements Do you have feedback, success stories or suggestions for improving this course? Email us at sbdcsupport@intuit.com. Do you have feedback, success stories or suggestions for improving this course? Email us at sbdcsupport@intuit.com.

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