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Accounting for the Right-Brained Business Owner
Elizabeth PearceProfitGuard4.Biz
415-595-4784 [email protected]
2
Left vs. Right Brain Functions
Creative Solutions
Innovation
Intuition
Risk Taking
Images
Holistic Thought
Most Business Owners
Analysis
Logic
Numbers
Science
Accounting
Linear Thought
Accountant/Bookkeeper
3
Profit Guard – 12 Page Monthly Report
• Every new client has found $50K or more • Supplements Traditional Financial
Statements– In Plain English– Financial Roadmap “The Plumbing”– Key Ratios and Benchmarks– Graphs Trends for Each Ratio– Sensitivity Analysis – Cash Needs with Growth
• Cash Conversion Cycle
4
Profit Guard Report Generation
$359,028 (1)
© 2013 Business Resources Services, Inc.
$161,806 (2)
$57,547 (5)
$107,500 (4)
Footnotes(1) $359,028 Cash Impact because of too much Inventory.(2) $161,806 Cash Impact because of too much Customer Credit.
(5) $57,547 Profit Impact over the time period if the goal was met.
$196,528 (3)
(6) $5,000 Profit Impact on 2% Payable Discounts.
Areas to review as a result of Scorecard
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<25%
25% to <50%(3) $196,528 Cash Impact that could be saved with longer payment terms.(4) $107,500 Profit Impact over the time period if the goal was met.
$5,000 (6)
≥50%
Distance From Goal Impact
Cash
Profit
http://www.brs-seattle.com/ProfitGuard/
RoadMap.pdf
Hello Telephone Co. 7/31/12
Period EndingTHE PROFIT ROAD MAP
Poor PricingPoor BuyingBookkeeper
ErrorsLow
Productivity
LOW GROSSMARGIN
LOW NETPROFIT
HighBorrowing
HighLiabilities
HighInterest
Low RetainedEarnings
No Cash Discountson Payables
Low SalesPoor Expense
Control
LOWCASH
High CurrentLiabilities
High HiddenCosts
Too MuchInventory
High A/R
Too Much Customer Credit
Low A/R
Not EnoughCustomer Credit
Not EnoughInventory
PoorInventoryControl
Shrinkage
PayableAging
Tw
o (2
) M
onth
s A
go
Las
t Mon
th
Cur
rent
M
onth
5/31/12 6/30/12 7/31/12Top 10%
Top 25%
50% AVG
Current Assets 1,543,042
Current Liabilities 604,320
Cash + Accts. Rcv. 863,777
Current Liabilities 604,320
Total Liabilities 1,219,538
Net Worth 1,032,595
Gross Profit 50,000
Sales 350,000
Net Profit Before Tax -34,797
Sales 350,000
Sales 350,000 X 12
Total Assets 2,369,396Net Profit Before Tax -34,797 X 12
Total Assets 2,369,396
Net Profit Before Tax -34,797 X 12
Net Worth 1,036,462
Cost of Goods Sold 300,000 X 12
Inventory 650,000
365 365
Inventory Turnover 5.5
Sales 350,000 X 12
Accounts Receivable 850,000
365 365
Accts. Rec. Turnover 4.9
Cost of Goods Sold 300,000 X 12
Accounts Payable 250,000
365 365
Accts. Payable Turnover 14.4
© 2013 Business Resources Services, Inc.
CalculationsFor Current
Month
Note: NA designates the Metric is not of value in this company
Greater than 50% from Goal
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Act
ual A
nnua
lized
2.5
1.6
29.9%
2.7%
1.9
5%
12%
5.4
Hello Telephone Co.
Period Ending 07/31/2012
Tre
nd Your Goal
Industry Standard
5.0 4.9 ▼
Inventory Turnover
2.9
8.1 12.2 24.3
2.4 1.2 0.8
10.4% 6.5% 3.4%
14.2% 11.2% 8.3%
35.0%
5.6
▼
12.2 7.9 5.9
65
5.2 5.5
BALANCE SHEET RATIOS: Stability (Staying Power)
INCOME STATEMENT RATIOS: Profitability (Earning Power)
ASSET MANAGEMENT RATIOS: Overall Efficiency Ratios
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Accounts Receivable Turn-Days 79 73 74 ▲ 60
1.5 0.8
2.0 1.2 0.9
0.8 1.0 1.5
45.0%
3029 25▼
45 45 30 1514
Average Payment Period-Days 32
12.7 14.4 ▲13Accounts Payable
Turnover 11.3 8.1
81
12.2
1223
46 62
15.9 7.9 5.9
46 62
10
11Accounts Receivable
Turnover 4.6
71 66Inventory Turn-Days
6.1
3068
4.5
30
12.2▲
8 Return on Investment39.2%
2.7% -18.5% ▼ 10%
5.8% -40.4%▼
15%
7 Return on Assets18.0%
1.9 1.9▼
2.06 Sales to Assets
2.0
1.4% -9.9%▼
7% 6.5% 5.0% 3.0%5 Net Margin
8.8%
26.7% 14.3%▼4 Gross Margin
35.0%
1.1 1.2 ▲0.8
45% 28.0%
1.3
2.6
3 Debt-to-Worth1.2
1.5 1.4 ▼ 2.0
Better than Goal
≤ 25% away from Goal
Greater than 25% from Goal
2 Quick1.7
2.6 2.6 ▼2.9
1 Current
THE SCORECARD
http://www.brs-seattle.com/ProfitGuard/In
conclusiveData.pdf
7
Historic InformationCash vs. Earnings
Trends
Asset Management & Cash Conversion
Issue Profit ReceivablesInventory
Payables
Payable Discounts $5,000Gross Margin $107,500
Net Margin $57,547
Total $170,047
=
=
=
=
**Note: 1% improvement in margin would mean an increase in profits of $3,750 to Hello Telephone Co. based on the last 3 months average.
© 2013 Business Resources Services, Inc.
1% Margin Sensitivity**
Metric Impact
1-Day Sensitivity*
Inventory Turn-Days
Accounts Receivable Turn-Days
Average Payable Payment Period
Margin Metrics (Month)
* Note: A 1 day of improvement in these metrics would increase the Cash of Hello Telephone Co. by the amount shown based on the last 3 months average.
$3,750 per 1%
Cash Conversion Metrics
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Hello Telephone Co.
$196,528
Cash Required Cash Lost
$359,028
$161,806
Cash and Profit Impact
$717,361
Period ending 07-31-2012
Margin (Gross or Net)
$9,278 per day
$12,500 per day
$9,278 per day
Sensitivity Analysis
http://www.brs-seattle.com/ProfitGuard/Ass
essment.pdf
PROFIT MASTERY
ASSESSMENT
Cash Conversion Cycle
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Planning ToolsChanges in Fixed Costs
Variable Cost Shifts
Borrowing NeedsWith Anticipated Growth
Efficiency Adjustments
salesVCFCNPFC TextBreakeven in Sales
FC(200,000)$ (175,000)$
Current Break-Even Sales = $1,757,494 Current FC = $1,213,025
For every $1 FC increase, $3.23 sales increase is needed for same Net Profit.
This chart reflects the amount of sales increase that will be needed for various changes in the fixed cost levels in your company.
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
Sale
s Req
uire
dTh
ousa
nds
Fixed Costs (FC) Change Thousands
Sales Required to Support Fixed Costs Changes
-$600
-$400
-$200
$0
$200
$400
$600
-16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16%
Net
Pro
fit C
hang
eTh
ousa
nds
Percent Variable Cost (VC) Change
Net Profit Impact with Variable Cost % Change
http://www.brs-seattle.com/ProfitGuard
/BreakEven.pdf
BREAK-EVEN
ANALYSISHello Telephone Co
$60K
$195K
-$400K
-125K
Fixed Cost Example
11
Business Coaches, Bookkeepers,Consulting CFOs, Accountants
• Another tool for consultative relationships–Additional billable time each month–A Balance Sheet management tool– Educational tool for accounting-phobic
• Profit Guard as Referral Source
12
Working with Lenders
1. Better informed and organized borrowers2. Basic bookkeeping errors discovered & fixed3. Owners with an understanding of cash use by
their business are lower risk4. Can be tied to financial education from Profit
Mastery (live classes, DVD)5. Rebranding/marketing opportunity
Financial Education-based Marketing
13
THANK YOU!
Profit Guard retails for $199.99/month
Use promotion code EP-dcgejxn for a price of $184.99, for a 30-day trial
14
Benchmark Data
Industry data, NAICS code based
Approximately 1,200 Industries
Over 900,000 private companies in Fintel database
15
Financial Education Marketing
More Loyal Customers
Differentiation in the Community
Clients with Better Cash Flow
More Profitable Clients