Business Finances

1. Business Finances

2. Four parts to a businesses finances • Expenses • Income Statement (Profit Loss Statement) • Cash Flow • Balance Sheet

3. Expenses • Your business will have two types of expenses: a) one-time expenses and b) operating expenses. • One-time expense are those costs that you incur only once when setting up your business. • Operating expenses are ongoing costs that you will have to pay every month. • Calculating these figures is important because when you plug them into your cash flow statement, they will reveal how much start-up financing you will need to get your business to a point of self-sufficiency.

4. One Time Expenses • Down payment on property or deposit on rent • Down payment or deposit on fixtures and equipment (computer printer, fax machine, photocopier) • Cars/Trucks • Decorating, remodeling, installation of equipment/fixtures, leasehold improvements • Starting inventory • Utility set-up fees

5. One Time Expenses • Promotion for opening • Licences and permits • Incorporation costs (where applicable) • Product development costs or franchise fees where applicable • Unexpected expenses

6. Operating Expenses • Yoursalary (management salaries) • Other salaries (eg. for your shipper, bookkeeper, receptionist) • Rent or mortgage payments • Raw materials • Storage • Distribution • Office supplies and equipment (eg., pens, paper, photocopying, computer, printer, fax machineetc.)

7. Operating Expenses • Telecommunications (eg. telephone, fax, internet service, cellular, etc.) • Electricity • Insurance (including workers insurance) • Promotion (including advertising) • Professional services (accountants and lawyers, for example) • Maintenance • Repayment of loan capital and interest • Other financial expenses (eg. sales discounts, bad debts)

8. Income Statement • An income statement shows your profit or loss for a particular period of time. It details all revenues and measures that against all expenses and other costs. • Revenues = all money collected from sales and services • Expenses = wages, telephone/internet, hydro bills, insurance, property taxes, fuel, stationary and etc… • It should be prepared on a monthly or quarterly basis. • Income statement is predominantly an accounting tool used to measure a business' performance.

11. Cash Flow Statement • A cash flow statement is a reflection of how much money your business has at a particular point in time. Without cash, your business can't operate. • If your cash inflows (collected revenue) exceed your cash outflows (disbursements), your cash flow is positive Revenue > Expenses • If your cash outflows (disbursements) exceed your cash inflows (collected revenue), your cash flow is negative Revenue < Expenses

12. Cash Flow Example • Cash Flow Example

13. Balance Sheet • The Balance Sheet has two main purposes: (1) Listing the assets of your company and (2) Listing the liabilities of your company. • Assets should include: • Current assets such as accounts receivable, inventory you have on hand, and your cash balance. • Fixed assets such as property, equipment, furniture and fixtures, and vehicles.

14. Balance Sheet • Liabilities should include: • Current liabilities such as accounts payable and debts that you must pay within a year (suppliers & creditors). • Long-term liabilities include long-term loans, like mortgages, equipment loans or loans you make to the business. • A Balance Sheet is so named because the calculations reported should always lead to a balance between the dollar amount of Assets and the total of Liabilities