On Your Mark, Get Set, and GO!
Let’s face it… 2020 was rough and assuredly 2021’s New Year’s resolutions may look a bit different than they did a year ago. While the traditional goals to eat a little less, exercise a little more, stress less, or save more are without a doubt still on the list, if 2020 taught us anything, less is most definitely more.
No matter your goals for this year, each new season brings opportunities for renewal, change, and growth. Getting organized, realigning the company vision to better sustain during “COVID times”, or simply deciding to put out the old ways and make room for something new has potential to re-invigorate the company direction. For small-to-medium size business owners, sales leader, employee manager, or customer service supervisor are some of the many hats required to grow your business. Knowing whether your effort is profitable requires every business owner to also know their financials adding bookkeeper or accountant to an already full list of responsibilities.
Unless you are running your own bookkeeping or accounting business, keeping the financial records for your company may seem daunting, nor the most effective use of your time. Everything from preparing financial statements to organizing records for taxes to be reviewed by a CPA all hinge on having accurate number crunching. While it’s unlikely that any article, book, or podcast will tell you everything you need to know about bookkeeping, here is a short list of key terms to add to your “rolodex” and get the year started as simply as possible.
PROFIT: a financial gain or advantage, specifically the difference between the amount earned and the spent buying, operating, or producing
LOSS: an amount of money lost by a business, company, or self-employed person
Both PROFIT and LOSS are reported on the P&L statement, which provides a summary of the revenues, costs, and expenses of doing business. The profit and loss statement is an important part of the company financial picture, is usually reported in fiscal quarters or years, and it calculates activity during that time in business.
ASSET: Items or goods of ownership convertible into cash; total resources of a business or individual, as cash, accounts receivable, securities, inventory, furniture, or equipment.
LIABILTY: Money owed, debt, or financial responsibility for a business loan or to an investor.
While many people confuse LIABILTY with expenses, it is more specifically money a business or owner owes to someone or something else, such as a small business loan to a bank. A BALANCE SHEET shows all ASSETS and liabilities, along with owner equity or capital for the business, at a particular point in time. The balance sheet, along with the profit and loss statement is also part of the suite of financial statements your bookkeeping firm provides.
CASH: While cash doesn’t usually require an explanation, specifically cash is: a form of legal tender, currency (bills) or coins, and can be used to exchange goods, debts, or services
The CASH FLOW statement is the final part of the trilogy of financial statements paramount to keeping track of how the business is doing. To know where the cash is coming from and where it is flowing to, the cash flow statement tracks the actual movement of money into and out of the business. Cash flow can often be converted to measures by your bookkeeping or accounting firm to track the specific rate of return on a product or service.
While this may seem like a lot to keep up with, the good news for small business owners is that you don’t have to go it alone! One of the best ways to simplify the day-to-day operations of the business, free up more time to focus on the core vision, and maximize more with less concern about the company financials is to entrust a professional bookkeeper or accounting expert with the tasks of managing, preparing, and tracking the profit, loss, assets, liabilities, and cash flow.
More time, less worry… ready, set, and go!
By Susan Amsler
January 18, 2021
Randolph Business Resources, LLC.
Our experienced staff are ready to lend a hand to you and your business.
Visit us @ www.randolphacctg.com
Call us at: (615)202-5829 if you need immediate assistance