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www.profitsplus.org
Presented by Tom Shay of
Profits Plus Solutions
727-464-2182
tomshay@profitsplus.org

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Your debt to equity
ratio; your current
ratio; your Horatio
Alger’s ratio;
important accounting
stuff
Where’s the
money to pay
bills? Sales are
booming;
where’s the
cash?
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 #1 You may not be carrying your
share of the conversation and the
accountant likely knows you are not
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Just because the profit and loss
statement says there is income,
does not mean this is how much
money is in the checking account to
take out!
So, where is it?
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#2 Growth costs money that has to
be paid in advance
Higher inventory than last year
More equipment than last year
Higher receivables than last year
Lower payables than last year
Higher sales than last year
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#3 The expenses of the profit and
loss statement can be arranged in
any format you want
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Income Statement
Cash Sales 62,000
Cost of Goods Sold 39,370
Gross Profit 22,630
Gross Profit Percentage 36.5%
Operating Expenses:
Wages 12,000
Payroll Taxes 960
Property Taxes -
Rent 8,000
Telephone & Utilities 2,400
Repairs 150
Advertising 1,575
Accounting & Legal 200
Automobile 140
Bank Charges 210
Computer Operations 175
Dues & Subscriptions 300
Insurance - General & Workman's Compensation 800
Licenses & Taxes (not sales tax) 100
Office & Store Supplies 300
Outside Services 250
Travel 1,000
Total Operating Expenses 28,560
Operating Income (5,930)
Other Income and Expenses:
Miscellaneous Income -
Interest Income 265
Interest Expense -
Net Income Before Taxes (5,665)
Federal Income Tax -
Net Income (Loss) (5,665)www.profitsplus.org
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Month YTD Month last year YTD last year Budget Variance
Sales 100% 100% 100% 100%
COGS
Gross profit % % % %
Operating expenses
Advertising expense
Advertising
E-Newsletter
Website
Advertising subtotal % % % %
Occupancy expense
Building repairs
Maintenance
Rent
Utilities and telephone
Occupancy subtotal % % % %
Payroll expense
Benefits
Owner draw
Payroll taxes
Wages and salaries
Workman's Comp and Health Insurance
Payroll subtotal % % % %
Accounting
Balancing account
Bank and merchant service fees
Depreciation
Dues and subscriptions
Freight
Business Insurance
Legal
Loss
Meals and entertainment
Miscellaneous
Office expense
Office supplies
Merchandising
Printing
Postage and shipping
Returned checks
Software support
Business & Personal Property Taxes
Travel
Total operating expenses % % % %
Net income % % % % 10

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#4 You can add details to the
income side of the profit and loss
statement
Usually created on a monthly basis.
Definitely created on an annual
basis
Purely historical
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Cost of Goods Sold is usually for
businesses that sell products.
Cost of Doing Business is usually
for businesses that sell services.
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#5 Your margin is not likely to be
jumping around from month to
month
If it does, what is likely happening?
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Inventory is not an expense
Principle payments are not an
expense
#6
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12/31
ASSETS
Current Assets:
Cash on hand $1,500.00
Checking Account $17,500.00
Savings Account $3,050.00
Accounts Receivable $14,215.87
Bank Card Receivable $1,340.34
Inventory $275,654.23
Total Current Assets: $313,260.44
Investments:
Cooperative Stock $23,125.46
Cooperative Notes $12,597.47
Total Investments: $35,722.93
Long Term Assets:
Property and Equipment:
Fixtures and Equipment $126,245.11
Building $325,465.88
Total Property and Equipment: $451,710.99
Accumulated Depreciation: $207,950.25
Total Net Property and Equipment: $117,515.63
Other Assets:
Utility Deposits $1,700.00
Total Other Assets: $1,700.00
Total Assets: $468,199.00
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable $47,850.00
Building mortage - current $24,000.00
Note payable - current $45,000.00
Long Term Liabilites:
Building mortgage $62,000.00
Note payable $84,000.00
Total Liabilities: $262,850.00
Stockholders' Equity
Capital Stock $65,000.00
Retained Earnings $114,664.00
Current Income $25,685.00
Total Stockholders' Equity $205,349.00
Total Liabilities and Equity $468,199.00www.profitsplus.org
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Your monthly checkup
Assets = Liabilities + equity
Assets – current and long
term/fixed
Liabilities – current and long term
#7 If you borrow money, it is
important how assets and liabilities
are categorized regarding current
and long term/fixed
Current/long term is subject
to some interpretation
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Your business needs an infusion of
cash to grow;
Do you borrow from a bank?
Borrow from yourself? Increase the
contributed capital?
#8 Depending on the ownership
format and other outstanding
loans; it does make a difference
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Stockholder’s equity, net worth,
equity - How much of the business
do you control?
Is your equity increasing?
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#9 You are the most qualified
person to write the budget
A budget is a profit and loss
statement (income statement)
written as a projection of what you
expect to happen.
Creating the profit and loss sheet of
the future!
Deciding with detail how you define
this year as being a good year
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For existing businesses, you use
your last two to five years of
financials for your research
For new businesses, you use the
pro forma that was created as a
part of your business plan
If you have neither, you use
your best guess
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Budgeting ‘open to buy’
Having the right inventory at the
right time in the right quantity
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While there may be the desired
profit there at the end of the year,
will there be the cash necessary to
make this budget work?
More importantly, will there be
enough cash for each of the 12
months?
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#10 A cashflow plan is a ‘must have’
A budget that takes into
consideration cash and any
transaction involving cash
The #1 management tool!
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Cash on hand
+Net profit
+Cost of goods sold
-Purchases
-Equipment purchase principle
-Increase in receivables
Planned cash on hand end of month
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 #11 You may not have the legal
entity that is right for your business
 Business legality format – 6 options
 Sole proprietorship
 General partnership
 Limited partnership
 C or S corporation
 LLC
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#12 When you borrow money, does
the accountant tell you they should
review the loan agreement before
you sign it?
You may be out of compliance with
the loan
#13 When something is depreciated
or amortized, are you participating
in the decision about how fast it is
done?
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#14 Your accountant is not ‘all
knowing’ or having the final
decision; the IRS does
Accounting is not black and white;
it is 50 shades of grey
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Accounting
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Grab the article from the
profitsplus.org website: We are
not playing on the same team –
Guide to selecting an accountant
Finding the accountant right for
you can be a challenge
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A billion here, a billion
there, pretty soon it adds up
to real money!
Senator Everett Dirksen
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