Beginner’s Guide to Preparing a Cash Flow Statement

 

What is a Cash Flow Statement?

A cash flow statement is the total amount of money, both physical or virtual, transferred in and out of your business. It is a combination of information from your profit & loss statement and balance sheet. 

 

Having cash flow steadily into your business keeps your employees paid and the lights on. You must learn how to convert sales into cash consistently and quickly to build a safety net for your business’s future. 

 

Should I Use the Direct Method or the Indirect Method?

Before starting anything, you must decide which method you should use to prepare your statement. The direct method tallies up each instance of cash received or paid. The indirect method uses accounting line items such as net income and depreciation to arrive at cash flow. 

 

Choosing which method to use depends on each business. Small businesses use the direct method because they have fewer income sources and expenses. If you are a large corporation, your financial health is better represented with the indirect cash flow method.

 

What Does a Cash Flow Statement Show?

 

Your cash flow statement shows the following:

Compare cash from operating activities to your business’s net income to determine the quality of earnings. Your earnings are high quality if your cash from operating activities is higher than your net income.

 

Use your statement to show investors the cash flow coming in and going out. This shows them your overall performance.

 

If your business is losing money from operation expenses or financial investments, you will see that on your statement. 

 

cash flow

 

How to Increase Your Cash Flow

 

Reevaluate Pricing

Consider changing the price of your products. You might be under-selling or over-selling your merchandise. Find the perfect price-point through testing. If you are under-selling your items, consumers might not take you seriously. If your price-point is too expensive, then people will turn to your competition.

 

Sell or Lease Equipment

Computer and equipment upgrades happen often with technology advancements. The old equipment can quickly pile up in your office. Consider selling these items for a taxable gain. Keep in mind that you should sell nothing below the book value.

 

On the flip side, you may decide to lease items instead of purchasing them. Talk to your accountant or bookkeeper to weigh out your options.

 

Subscription Sales

Use a subscription service for products consumed consistently and repurchased throughout the year. A subscription service allows your clients and customers to prepay for their items. This means you receive cash upfront.

 

Cash Flow Statement Help

PL Consulting has served the Baltimore, Maryland area for many years. We customize our bookkeeping and accounting services to each client. Your ideas are unique to your business, and we understand that. 

 

Do you need help to prepare your statement? Contact PL Consulting to set up an appointment at 410.764.3731 or contact us on our website.

 

Budgeting Basics for Small Business Owners

 

Creating a budget is one of the most important parts of running your small business. Your budget should be realistic. Match expenses to your expected revenue. Budgeting should allow your small business to expand and grow. 

 

It is nearly impossible to run a successful business without a budget in place, so you must keep track of what your money is going towards. Budget planning helps with the financial aspect of your business. It also improves general business management. Here is our expert advice on budgeting basics that you need to know to run your small business.

budgeting benefits

Budget Research

Extensive research is the first thing you want to do when developing your budget. Learn about industry standards and common costs that go into running your type of business. Speak with other business owners to get an insight on what expenses are like for them. 

 

Find suppliers and vendors that fit within your budget. Determine which business has the best deals and quality. Ask the right questions about bulk orders and payment plans.

 

Use Spreadsheets

When creating a budget for your small business, you must use a spreadsheet to manage your expenses. Drafting a spreadsheet is an effective way to lie out all the important numbers. Constantly update your spreadsheet with your revenue and costs.

 

Pricing Help

A budget maps out each of your costs including health care, utilities, wages, rent, and marketing. Once you have figured out the costs, you can set a reasonable price for your products and services to make a profit.

 

Spend What You Need

Budgets prevent you from spending money on unnecessary products and services. Your budget shows your upcoming business costs so you can prepare for them. This ensures that you make your payments in the right amounts and on time. 

 

Loan Assistance

You might take out a loan to grow your business. This could be for a building renovation, new product, or marketing expenses. Show lenders that you make payments on time and have valuable assets. Your budget proves that you are financially stable enough for their loans. 

 

Planning for the Unknown

Plans do not always work out. Having a budget in place means you can easily track your business’ financial activity and performance throughout the year. Adjust your budget as new expenses come along so that you are ready for unexpected occurrences. 

 

Build Your Budget

Whether you do the budgeting on your own or delegate the task to someone else, it needs to be done. Increase your profits, save money, and run a successful business.

 

PL Consulting has served the Baltimore, Maryland area for many years. We customize our services to each client and their business plans. Your ideas are unique to your business, and we understand that. 

 

Want to learn more about budgeting basics and benefits? We are here for all of the questions that you have as a small business owner. If you would like to set up an appointment, call us at 410-764-3731.

 

5 Tips for Maintaining Your 2020 Business Budget

As the first month of the new decade reaches its end, it’s time to analyze how well you’ve been sticking to those New Year’s resolutions. How well have you been adhering to the budget you created for the year? It’s easy to get off track when life can be so unpredictable at times. Here are some great tips for maintaining your 2020 business budget!

 

Employee Involvement

 

You do not have to handle all elements of your business on your own, nor should you try to. Having a team to help you with your business budget can help to not only improve efficiency, but also hold you more accountable for sticking to the set budget. Create a budget team of employees that will assist you in maintaining your business budget. Having more than one voice can help you create a plan from multiple different perspectives, allowing you to consider things you may not have thought of on your own. You should keep employees updated on both short and long-term financial goals so they understand the vision and are also prepared for any upcoming financial changes.

 

Analyze Risks

 

Every business has potential risk factors involved that can affect their finances. You want to analyze all of the possible risks that your business has and budget accordingly. It can be difficult to budget for things that haven’t happened yet and that may never happen, but having extra money set aside just in case can save your business in case of an emergency. You want to always leave room in your budget for any unexpected expenses that may arise.

 

Overestimate Expenses

 

When you are mapping out your expenses for the upcoming months, it’s always best to overestimate rather than underestimate your expenses. A lot of businesses operate on a project-to-project basis, which means that no two projects will be exactly the same. Some projects may go over-budget and you have to be able to compensate for that. As mentioned before, an important aspect of budgeting is planning for the unexpected. Leaving room for going over budget will ensure that your business continues to make money rather than lose it.

 

Time is Money

 

The phrase “time is money” is something that we hear often, but often don’t account for in our business budgets. The more time a project takes, the more money it costs in the long run. A big part of maintaining your business budget is to always plan out your time as well. You want to treat your time as if it’s money, meaning setting concrete project deadlines to ensure things get done in a timely fashion. If you think a project will be finished on Friday, promise delivery on the next Monday. That way, you can deliver it early if it gets done on time and leave some extra time in case the project isn’t finished by that day.

 

Constantly Revisit Budget

 

The best way to maintain your 2020 business budget is to constantly go back and revisit the budget. When unexpected expenses or income arises, you want to adjust your business budget accordingly. Businesses are constantly changing and fluctuating, so your budget should do the same. A good rule of thumb is to revisit your budget at the end of each month to make the necessary changes require to keep your business on track.

 

Contact PL Consulting Today for Your Business Budget!

 

At PL Consulting, we consider our clients part of our team. We provide full financial management services including bookkeeping, accounting, payroll, tax preparation, budgeting, and more.

Serving the Baltimore area for several years, we are dedicated to providing customized service to fit each and every one of our client’s unique needs.

To book PL Consulting today or get more information, contact us at (410)-764-3731 or at https://www.plcfo.com/contact/

Business Budgeting 101: New Year Planning

The new year is right around the corner, so if you haven’t already, now is the time to plan a budget for the upcoming year. The new year is the perfect time to sit down and analyze your business finances, creating a plan to save money, increase profits, and ensure success. Here are some tips for planning your New Year budget!

Digital Footprint

With modern technology, more and more businesses are going digital in some way. Take a moment to evaluate your digital marketing strategy to see how you could expand and improve. An online presence is essential in this age to maintain a successful business.

 

Often times, digital marketing is less expensive than physical marketing. Including digital marketing in your overall marketing budget can help to improve business and also save you some money.

Vendor Pricing

If your business requires going through a vendor, the beginning of the year is the best time to research vendors and ensure you’re getting the best quality for your money.

 

Often times, vendors are also completing their budgets around this time and offer better deals to ensure they achieve their financial goals. The right vendor will be reasonably priced and provide quality products to your company.

Equipment Check

It’s easy to get consumed in business tasks and forget to regularly check your business equipment. Testing your equipment at the beginning of the year allows you to plan accordingly for anything that needs to be fixed, updated, or replaced.

 

Make note of any equipment that will not last through the year and create a budget accordingly. High-quality, efficient equipment can greatly improve productivity and save your business money in the long run.

Employees

Take the time to analyze your staff at the beginning of the year. If there are any adjustments or additions that need to be made, now is the time to begin planning for it.

 

Finding the right person to fill a position is no easy task, so it’s better to plan in advance. Budget for new hires as well as any employee activities you’d like to have throughout the year.

Need Help with Your New Year’s Budget? Contact PL Consulting Today!

At PL Consulting, we consider our clients part of our team. We provide full financial management services including bookkeeping, accounting, payroll, tax preparation, budgeting, and more.

 

Serving the Baltimore area for several years, we are dedicated to providing customized service to fit each and every one of our client’s unique needs.

 

To book PL Consulting today or get more information, contact us at (410)-764-3731 or at https://www.plcfo.com/contact/

4 Benefits of Budget Planning for Your Business

budget planning

It is nearly impossible to run a successful business without a budget in place. As a business owner, you must keep track of how much money you have and what you are spending it on. Budget planning not only helps with the financial aspect of your business, but also improves general business management. Here are four benefits of budget planning for your business.

Pricing Assistance

When you are setting a price for your products or services, you must take into account all of your business costs. The only way to make a profit from your product is to make sure that the price outweighs the cost.

A budget maps out each of your costs including health care, utilities, wages, rent, and marketing. Once you’ve figured out the costs, you can set a reasonable price.

Credit & Capital

When it comes to taking out loans or trying to gain credit, you must prove to the lender that you have valuable assets. Without financial data to prove that your business is financially stable, it is highly unlikely that you will be able to get a good loan.

Having a budget is especially beneficial for new businesses trying to acquire credit and capital because it shows your potential partners how their participation affects your profits.

Adaptability

It is a well-known fact that everything doesn’t always go as planned. Having a budget in place means you can easily track your business’ financial activity and performance throughout the year.

If something unexpected happens that throws things off track, it is easy to make adjustments if you already have a budget in place. Changes can be made as needed to help cut costs and increase profits.

Prevent Unnecessary Spending

Without a budget, it becomes a lot easier to spend money that you don’t actually have. A business budget allows you to see upcoming costs so that you have time to prepare and account for those.

Budgeting out the exact amount for bills and other payments each month will ensure that you always have enough to pay necessary expenses.

PL Consulting for all Your Financial Needs!

At PL Consulting, we consider our clients part of our team. We provide full financial management services including bookkeeping, accounting, payroll, tax management, budgeting, and more.

Serving the Baltimore area for several years, we are dedicated to providing customized service to fit each and every one of our client’s unique needs.

To book PL Consulting today or get more information, contact us at (410)-764-3731 or at https://www.plcfo.com/contact/

How To Forecast Your Small Business

Forecasting your small business is vital especially when your a new, small business owner. Owning a business is exciting! You finally get to do things your way and turn passion into profit.

Forecasting your small business is vital especially when your a new, small business owner. Owning a business is exciting! You finally get to do things your way and turn passion into profit. A new business owner is often enthused and optimistic about the direction of their new company but often have no idea or interpretation on how to predict future sales. If you’re a new small business owner or a veteran that wants to make they’ve crossed their T’s and dotted their I’s, then keep reading for tips on how to forecast your small business.

Continue reading “How To Forecast Your Small Business”

Three Ways to Keep Better Track of Your Money

A high percentage of people live paycheck to paycheck which isn’t ideal. If you are living paycheck to paycheck, then your money needs better management.

Statistics prove that many people do not have a lot of money in their savings. In fact, in 2016, Forbes reported that 63% of people have less than $500 in their savings. This statistic is quite alarming! The goal of all small business owners is to keep their business financially stable. However, what about their income outside of the company? It is quite challenging to run a business without taking care of your own financial needs first. Still, even if you’re not a business owner, these tips will benefit you. A high percentage of people live paycheck to paycheck which isn’t ideal. If you are living paycheck to paycheck, then your money needs better management. Keep reading for the top financial tips to keep better track of your money.

Continue reading “Three Ways to Keep Better Track of Your Money”

Budgeting Tips for a Small Business

Budgeting Tips for Small Business
Good budgeting is especially important for small business owners to be successful.

As a small business owner, you know that your budget is absolutely crucial to keeping your finances in check and the growth of your business. While you can’t plan for everything, you can have a smart, solid budget that will account for bumps in the road and financial risks while helping you strive for success. Your budget doesn’t just account for product, employee payroll, or standard business expenses. Budgets also help you deal with losses, downturns, and the unpredictable. Here are just a few small business budgeting tips. Continue reading “Budgeting Tips for a Small Business”

Which Payroll Software Best Suits Your Business?

Payroll Software
The right payroll software for your business will depend on a number of factors. Learn some of your options below!

Streamline your company’s internal finances with a payroll software. Whether you are a large corporation or a small business, a payroll software is an essential ingredient for success. Modern and efficient, it organizes all important documents and manages employee pay periods. When business picks up, the payroll software will provide valued guidance with detailed financial reports. It is the unsung hero in the HR department. Selecting which specific program best suits your business model is one of the most important payroll management decisions. With a wide array of options available, three software programs have emerged as top competitors:

  1. Gusto
  2. OnPay
  3. BambooHR

Weigh the pros and cons of each payroll software to identify which program would mesh the best with your business. Keep in mind, each company is unique and presents distinct needs. Platforms designed for large corporations may prove to be incompatible with smaller businesses. Know your business and select the program that will provide the most support. Continue reading “Which Payroll Software Best Suits Your Business?”

How To Create A Budget For Your Small Business

Learn how to create budget for your small business.

Starting a small business can be a stressful process since there are several elements involved.  One of the most vital elements of opening a small business is crafting a budget.  You want to create a budget that you can realistically follow so that you can at least match your expenses to your expected revenue.  Your budget should allow you to expand and grow your business in the future.  Luckily, there are a few simple tips for creating a budget for your small business. Continue reading “How To Create A Budget For Your Small Business”