Cash Basis Accounting: The Missing Numbers

Cash basis accounting is used by a large percentage of small businesses. It is used because it is simple to understand and requires very basic record keeping skills to maintain. It also allows a company to pay taxes based only on revenues collected rather than on the full amount of revenues billed.

In cash basis accounting, deposits from sales or services are recorded as revenue. Checks and other forms of outgoing cash are recorded either as cost of goods sold or operating overhead expense. The net results determines the company’s profit or loss. A very simple system, as stated above.

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Tags: Bank Accounts, Cash Balance, Cash Basis Accounting, Cash Position, Checks, Critical Number, Current Assets, Desperate Need, Financial Position, Financial Statements, Overhead Expense, Payables, Point In Time, Profit And Loss, Profit And Loss Statement, Profitability, Receivables, Relationship, Small Businesses, Vendor Invoices

Your Breakeven Point: What It Is and Why You Should Know It

Your business incurs costs in order to turn a profit. It’s the old “spend money to make money” maxim. But how much money should you spend? And when will you make a profit?

The point at which you stop losing money and start earning a profit is called the “breakeven point”. When planning your business (either at the very beginning or in any given period), knowing your breakeven point will give you a goal to work towards and some clear direction to manage your costs and prices.
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Tags: Benchmark, Breakeven Point, Business Decisions, Direction, How Much Money, Magic Number, Maxim, Relationship, Variable Expenses

Transform Your Business With Spreadsheet Accounting – Part 3

In the first blog post in this series I introduced you to the 3 key spreadsheets that every business needs and I gave you a really quick-and-dirty way to set up the three spreadsheets in one Excel file. In the second blog post in this series, I talked about the relationship between all three spreadsheets.

I’m realistic enough to realize that financial statements can seem complex and unwieldy at the best of times, which I’ve been walking you slowly through the details that I felt you needed to know. And I was planning to show you how to build the three spreadsheets yourself. But I’ve got good news for you: In the last blog post of this series, I’m going to make it really easy for you! I’m going to link you to one free file that you can download that will GIVE you all three spreadsheets in a single Excel file. Here’s how to get it and use it:
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Tags: Balance Sheet Income Statement, Business Accounting, Business Guide, Business Owners, Cash Flow Statement, Consolidated Report, Decisions, Financial Spreadsheets, Financial Statements, Free File, Microsoft, Microsoft Excel, Microsoft Office, Relationship, Report Template, Spreadsheet, Step 1, Template Section