Being an entrepreneur like Luke Skywalker (or Count Dooku — rest in peace, Mr. Lee) working for yourself can bring a whole host of benefits – better well-being, better business hours, and being happy in what you do are the positive sides to entrepreneurship along with wielding your trusty light saber. But what usually comes with working for yourself and running your own business are the financial reports and data that most of us just don’t like to decipher, leading us to financial peril.

Profit & Loss

Profit and loss are a given in business, yet there are many entrepreneurs out there who don’t even look atP&L statements Yoda their statements, thinking a Jedi mind trick would, well, do the trick. Understanding the language of P&L statements is actually quite straightforward even from a business bookkeeping aspect:

Sales – Costs = Profit

There are sometimes different versions of these words, but the formula is still the same. Sales, revenue, or income will be at the top of your statement; cost or expense, somewhere in the middle; and profit, or net income, will be the final profit sum at the end of your statement.

Working Out Subtotals

You may see columns in your P&L statement such as a breakdown as to where your costs and sales come from. For example, if you own a car rental business, you may have three separate sales statements; one each for small cars, family cars, and SUVs.

Costs may also be broken down in similar ways. In the case of a car rental company, you may wish to breakdown your costs for car hire, maintenance, and staff or building upkeep. It doesn’t matter how you break down your sales and costs, because these always add up to total sales and total costs. A breakdown of these can help you to analyze where you gain the most or least profit, so that you can then fix or maximize that particular product, cost or service.

A Mathematician, You Do Not Have to Be

So says Yoda. Once you take a section of your P&L statement and look further into what it really means, profit and loss statements need not be so complicated. Just remember that sales, minus cost, equals profit. The more sales you create, the larger your profit. The more cost you incur, the more likely you will make less profit. Now may the Force be with you.

Predicting Cash Flow Investments: Not an Easy Feat

Posted by wpadmin | Posted in Finances | Posted on 15-07-2015

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Sure, you’re good at numbers and you might not need that personal CPA to handle your income taxes (we beg to differ). But if you operate a business and do your bookkeeping, watch out: reporting cash flow investments isn’t as easy as it looks!

You Actually Need to Have at Least SOME Understanding of GAAP or IAS Standards When Reporting Cash Flow Invesmentscash flow investments

Essentially, you need a CPA. A financial adviser. Somebody who not only knows numbers, but finances, revenue, profit, P&L, all the goods when it comes to a business. You can imagine that any potential landlord regarding a rent-to-own home would benefit from this!

Having this knowledge — if you want to take the time to attain that knowledge — would benefit in any industry. But, again, we’d say to check out these reviews on the Income Tax Planning Network as well as Cloud Based Bookkeeping just to see how much time and headaches you can save in having someone truly specialized handle all of it for you. If you don’t have the financial management in place, rest assured: your finances will fail! Something you want to avoid….

Simply Set the Correct Policies and Follow a Strategic Plan

Financial statements are fickle. So you lay down the ground rules. Your long-term assets and other investments? Standardize where they’re acquired and disposed of. Work closely with your business CPA and make sure it’s all kosher according to your equity, cash flow, total revenue and profit. Make sure the numbers line up.

Of course, we’ve said this before, and we’ll say it again: you can’t do it — unless you’re maybe Donald Trump, perhaps — without the correct financial assistance!

 

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