Overview of basic financial statements that every business owner needs to know to include: cash flow statement, income statement (P&L) and balance sheet.

1. Understanding Financials
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2. Financial Statements
• What are financial statements?
– Cash Flow Statement
– Income Statement (P&L)
– Balance Sheet
• Do you know what the statements
show?
• How do you use the statements to
start and manage your business?
Understanding Financials 2

3. Find An Accountant
• Seek an accountant to establish
accounting procedures
• Use software programs (such as
QuickBooks) available to do number
crunching
• Call San Antonio’s CPA Society for
reputable names of accounts who
understand your business type:
3Understanding Financials

4. Cash Flow Statements
• Used to plan start-up costs including
working capital
• Prepared monthly in advance for startup
and regular operations
• Used to plan your flow of cash, to make
sure that you have money to pay your
bills on time
• Check actual vs. plan, then take
corrective action where needed
• It is NOT a profit and loss statement
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5. Sample Cash Flow Statement
5
Begin Month 1 Month 2
Cash on Hand $ 25.0 $ 4.8 $ 6.2
Cash Receipts
Cash Sales 0.0 15.7 17.2
Collections 0.0 0.0 4.9
Other 5.0 5.0 5.0
Total Cash Available $ 30.0 $ 25.5 33.3
Cash Out (used)
Beginning Expenses $ 20.8 2.5 0.0
Variable Costs 0.0 8.4 15.9
Fixed Costs 4.9 4.9 5.7
Principle on Debt 0.0 1.0 1.0
Owner withdraw 0.0 2.5 2.5
Total Cash Expenses $ 25.7 $ 19.3 $ 25.1
Ending Cash Available $ 4.8 $ 6.2 $ 8.2
Understanding Financials

6. Income Statements
• Plan Income & Expense in advance
• Check Actual vs. Plan
• Sales and Expenses in line with
Business Plan
• What is Gross Profit vs. Net Profit?
• You should produce a Profit and Loss
Statement at the end of every month
• Take corrective action where indicated
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7. Sample Income Statement
7
2009 2010 2011
Net Sales – after allowances, etc. $ 701.4 $ 694.1 $ 744.8
Variable Costs
Materials 122.5 137.4 118.5
Labor 276.9 284.4 293.1
Travel 70.1 58.2 65.3
Fixed Costs
Administration 89.9 88.1 82.9
Advertising 24.9 29.6 34.3
Overhead 76.3 95.7 86.2
Total Expenses $ 660.6 $ 693.4 $ 680.3
Operating profit $ 40.8 $ 0.8 $ 65.5
Understanding Financials

8. Balance Sheets
• Assets = Liabilities + Capital
• Snapshot of the business. Tells the condition
of the business at a particular date.
• Periodic Balance Sheets give you a
continuing picture of the progress the
business is making. (Positive or Negative)
• How much you own. How much you owe.
• What are your Assets and Liabilities
• How much capital do you have in the
business.
• Produce at least quarterly.
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9. Sample Balance Sheet
9
2009 2010 2011
Cash $ 0.5 $ -8.1 $ -3.6
Accts. Rec. 125.1 138.1 168.2
Inventory 8.1 8.3 8.5
Total Current Assets $ 133.7 $ 138.3 $ 173.1
Net Fixed Assets $ 35.1 $ 26.1 $ 33.1
Total Assets $ 168.8 $ 164.4 $ 206.2
Accts. Payable $ 8.5 $ 16.0 $ 24.0
Credit Card Outstanding 6.5 5.8 3.5
Bank Line of Credit 9.5 14.0 2.0
Total Current Liabilities $ 24.5 $ 35.8 $ 29.5
Long Term Liabilities 28.0 26.0 31.0
Total Liabilities $ 42.5 $ 61.8 $ 60.5
Total Net Worth
(stock & retained earnings)
$ 126.3 $ 102.6 $ 145.7
Total Liabilities and Net Worth $ 168.8 $ 164.4 $ 206.2
Understanding Financials

10. How To Use Your Statements
• For planning ahead
• To check Actual vs. Plan
• To determine how you are doing
• Taking action where needed
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11. Resources for QuickBooks & Accounting Software
• Adult & Community Education offered
by local school and college districts
• UTSA SBDC program
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12. Get Connected & Learn More
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Sign Up for our business classes
Connect with us via social where we talk personal and small
business tips to help you reach your money goals
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