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Right-Brain Business Owners

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An accounting tool for those who find accounting difficult. Entrepreneurs who see new solutions, and are willing to take on risks, are right-brain dominant. Accounting (and numbers) are very left-brain. Profit Guard is a date visualization and communication tool, for financial management.
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Accounting for the Right-Brained Business Owner Elizabeth Pearce ProfitGuard4.Biz 415-595-4784 [email protected]
Transcript
Page 1: Right-Brain Business Owners

Accounting for the Right-Brained Business Owner

Elizabeth PearceProfitGuard4.Biz

415-595-4784 [email protected]

Page 2: Right-Brain Business Owners

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

Page 3: Right-Brain Business Owners

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

Page 4: Right-Brain Business Owners

4

Profit Guard Report Generation

Page 5: Right-Brain Business Owners

$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

Powered By:

<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

Page 6: Right-Brain Business Owners

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

Powered By:

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

9

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

Page 7: Right-Brain Business Owners

7

Historic InformationCash vs. Earnings

Trends

Asset Management & Cash Conversion

Page 8: Right-Brain Business Owners

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

Powered By:

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

Page 9: Right-Brain Business Owners

9

Planning ToolsChanges in Fixed Costs

Variable Cost Shifts

Borrowing NeedsWith Anticipated Growth

Efficiency Adjustments

Page 10: Right-Brain Business Owners

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

Page 11: Right-Brain Business Owners

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

Page 12: Right-Brain Business Owners

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

Page 13: Right-Brain Business Owners

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

Page 14: Right-Brain Business Owners

14

Benchmark Data

Industry data, NAICS code based

Approximately 1,200 Industries

Over 900,000 private companies in Fintel database

Page 15: Right-Brain Business Owners

15

Financial Education Marketing

More Loyal Customers

Differentiation in the Community

Clients with Better Cash Flow

More Profitable Clients


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