Basic Financial Management & Bookkeeping

Administrator

Nicole RoachMarketing Coordinator

BizCentral USA

Key Speaker

Andrea RootAccounting Coordinator

BizCentral USA

A Webinar By:

Welcome!

• BizCentral USA: A “One-stop” resource center for small businesses nationwide!

• Key Speaker: Andrea Root

• Questions

• Recorded Webinar Available At:

http://www.bizcentralusa.com/webinararchive/index.php

Agenda

I. Getting StartedII. ProcessIII. Financial Reporting ToolsIV. SolutionsV. ConclusionVI.Questions

Forward

• Some of the information in this presentation is complicated and generally takes more than one day to learn. The best way to learn it is through practice using a work book and real-life examples.

• We recommend consulting a professional before making any big financial decisions or changes

Getting Started

Getting Started: Key Terms

• Bookkeeping – basic recording of various financial transactions.

• Asset – something you currently, or will own in the future.

• Liability – something you owe to someone else.

• Accounts receivable – money owed by customers.

• Accounts payable – money owed to others.

Key Terms

• Cash flow – a revenue or expense stream

• Cash receipt – cash received

• Cash disbursement – cash paid

• Revenue – all incoming money

• Expenses- all outgoing money

Key Terms

• Profit/Surplus – when revenue minus expenses results in a positive number

• Deficit – expenditures were greater than revenues

• Net – total before deductions

• Gross- total after deductions

Process

Process: Basics

• There are two ways to do this:

– Cash basis

– Accrual basis.

• The greatest difference between the two is how you record transactions.

Process: Posting Your Transactions

• There are several ways to keep track of your financial records.

• I’ll give you a high-level overview of two methods:

1. Single entry

2. Double entry

Process: Single Entry

• There are two alternatives for the single entry method:

Date Description Amount11/2/09 Beginning Balance $1,000.0011/3/09 Purchased Office Supplies ($100.00)11/5/09 Performed Repair Service $250.0011/30/09 Ending Balance $1,025.00

Date Description Revenue Expense

11/5/09 Performed Repair Service $250.00

11/15/09 Paid Electric Bill ($125.00)

November Totals $250.00 $225.00

Process: Double Entry

• The double entry method is the preferred method of recording transactions.

• This method may seem complicated at first, but it will make things easier in the long run.

• When done correctly, your books will always balance

Double Entry

• Every transaction has equal debit and credit entries

Debits reflect:– Increase in assets– Decrease in liabilities – Decrease profit

(expense)

Credits reflect– Increase in liabilities – Decrease in assets– Increase profit

(income)

Date Accounts Debit Credit

11/2/09 Cash $250.00

Product Sales $250.00

11/3/09 Electricity $125.00

Cash $125.00

Financial Reporting Tools

Budget

• Budgets are important tools that can be used to create comparisons, analyses, and help manage your organization

• Budgets are changeable

• If your organization's actual revenues and expenditures are widely different from your budget, you need to determine the reason for the differences

Financial Statements

• A variety of financial statements and reports can be derived from bookkeeping information

• You should become very familiar with these documents

• You will likely see three primary reports amongst others

– Profit and Loss Statement

– Balance Sheet

– Cash Flow Statements

Profit and Loss Statement

• Shows changes in assets throughout the year

• Reflects if an organization is operating with a surplus or deficit

• Highlights areas of concern

• Is typically required for loans

Balance Sheet

• Shows the overall value of your organization

• Shows total assets, subtracts total liabilities, and reports net assets

• Generally reviewed at year end

• Banks or accountants may ask for this document.

Cash Flow Statement

• Provides information about all cash inflows and outflows from operations and investments

• Shows changes in cash throughout a given time period (quarter or year)

• It is important to know how much cash your organization has

Solutions

Manual Record Keeping

• Advantages: – You can organize the information using your

own system– You will gain a better understanding of the

process and it can be an excellent learning experience

• Disadvantages: – There is a lot of room for error– You need to be highly organized and stay on

top of the process– Your accountant may not understand your

system– Can be very time consuming and stressful

Computer Based Record Keeping

• Advantages: – Makes entries easier and quicker– Automatically updates ledgers– Easily creates financial reports

• Disadvantages: – You may not understand how the

accounting process really works– You may become less diligent about

keeping records– Software can be expensive and may take

time to learn

Outsourcing

Advantages:• Create and manage your income and expenses

• Handle all of your federal and state report forms

• Handle your key documents

• Create Reports

• Ensure compliance with regulations & industry standards

• Decreases opportunity cost of time spent supervising, training, & correcting records, entries, and other flaws

Outsourcing

Disadvantages: • You are removed from the process• You may not understand how the accounting

process really works• This can become costly (but doesn’t have

to!)

Conclusion

Conclusion

• Financial management is necessary for every organization

• Several methods can be used to fulfill common tasks and reach common goals

• Financial management can be complex, although with the right knowledge, resources, and tools, it doesn’t need to be stressful, or overly expensive

• Consult a professional if you have concerns about your organization's finances

Don’t Go At It Alone!

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Upcoming Webinars

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• 6-29-2010 3pm EST

Q & A

• Contact Us• Nicole Roach: Nicole@bizcentralusa.com

• Andrea Root: Andrea@bizcentralusa.com

• Visit www.BizCentralUSA.com or Call 407-857-9002

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