Accurate Accounting Will Boost Your Bottom Line

Many business owners see only the costs involved with keeping accurate accounts. They see employee costs and service fees related to recording data and creating financial reports. They know it is a necessity of business, but they only see it as an overhead cost to be kept as minimal as possible. What is often overlooked and minimized is the financial benefit of keeping accurate, up to date, accounting records.

Maintaining accurate records and reviews of financial reports is like preventative maintenance on your vehicle. It costs money to have the oil and filters changed on a regular basis. Having your tires rotating and balanced can seem like just one more thing to fit into your schedule. However, if you don’t take the time to have these things done on a regular basis, the end result can cost you much more in vehicle repairs and new tires, than if you’d simply paid for the maintenance as it was needed. Accounting works the same way.
Read More »

Tags: Accounting Records, Accurate Accounts, Accurate Records, Bottom Line, Business Failure, Business Manager, Business Owners, Cash Flow, Crunch, End Result, Finance Charges, Financial Benefit, Invoices, Overhead Cost, Payables And Receivables, Preventative Maintenance, Spiral, Tires, Unnecessary Expense, Vendor Statements

Income Statement Breakdown (Part 4): Finding the Bottom Line

We’ve been taking apart the income statement to help you better understand it and so that you can find money-saving, profit-increasing opportunities inside of it. This is the fourth and final step in the process and here we are getting close to the bottom line!

So far we’ve…

• Looked at Revenues and came away with Net Sales
• Looked at Cost of Goods Sold (either accrual or cash-based) and came away with Gross Profit
• Looked at Operating Expenses and came away with Net Profit

But those are not the only people who have their hand in the cash register! Let’s not forget banks and the government. In this fourth and final section of the income statement breakdown, we need to make sure they get their share.

Like the other sections, you add up the various expenses you have here and subtract it from Net Profit. This section is sometimes called “Non-Operating Expenses”. If you have shareholders, some of their payouts go here, too.

Now let’s look at this part of the income statement and we’ll compare how the accrual and cash-based system work so you can see both in action:

Read More »

Tags: Accrual, Banks, Bottom Line, Cash Register, Gross Profit, Income Report, Income Statement, Money, Net Income, Net Profit, Net Sales, Operating Expenses, People, Shareholders, Statement Numbers