Tri-R Business Solutions

Tri-R Business Solutions Bookkeeping and Accounting Services

10/17/2018

Internal Financials, what are they good for!!

If you are like most Small Business Owners I know, there are just not enough hours in the day to do everything. If you are like me, I expect you feel like a “Firefighter” each day as you run around all day dealing with problems.

However, one important thing you should do is to set some time aside each month to review your Internal Financials that your Bookkeeper provides for you.

You are getting Internal Financials each month, correct? At the minimum, you should be provided with an Income Statement and a Balance Sheet.These statements are usually produced on a monthly basis and often contain “Year to Date” totals as well as comparison totals for same periods the previous year.

An Income Statement will show you Revenues and Expenses with a resulting Net Profit/Income, unless things are not going well and you will be looking at a Net Loss/Deficit.

A Balance Sheet will provide a “snapshot” for a date (usually end of each month) that will provide you with information as to what Assets and Liabilities your business has.

You should be reviewing these statements at least once a month, no later than 30 days after the end of the previous month. The reason for this? By reviewing these financials, it will give you an opportunity to deal with problems “sooner” rather than “later”. There is nothing worse than waiting 3 or 6 or even 12 months to find out one of your critical costs or expenses is out of line.

If you are involved in a retail business such as a Restaurant, you might want to have “weekly” reports that provide critical information on things like Food and Labour costs. There costs are referred to as “Variable” for a reason; you have some control over these costs and by paying to attention as soon as possible, it allows you to “read & react” to manage and control these costs. I once worked with a client who waited till the end of each Fiscal year to review his financials, and he was horrified to find that several of his costs were way too high but he had not been aware of it and did not have a chance to get them under control earlier.

So make sure you set up a “reminder” to have your Bookkeeper provide these for you at least once a month, and set the time aside to actually review them in detail.

08/28/2018

What should I buy with all that cash in the bank!!

With the ability to monitor your bank balance “on the fly, there is a danger in not knowing how much of the money in the bank is really “yours”!!

If you haven’t done it already, you need to have a good system of monitoring and managing “cash on hand”.

In the “old” days, you had to take trip to the bank, or make a phone call to get your bank balance to know what was in the bank. With online banking applications for computers and cell phones, the balance is now available in an instant.

The challenge that Business owners now face is knowing how much of that “cash on hand” is available to spend. You might be saying “all of it”, and I know a few people who have done that in the past, and it did not turn out well for them.

You need to know the following information before you go ordering that new Tesla you have had your eye on for a while!!
Are there any checks that have been written and mailed out but haven’t cleared the bank yet? Knowing what the checks that have not “cleared” the bank yet is very important in managing cash flows.
Are all your taxes paid up to date or are payments coming up? This would include things like GST/HST, Source Deductions, Corporate taxes, etc. Spending Canada Revenue Agency’s funds is a big no-no, and some business owners’ set up a seperate account to transfer these funds on a regular basis so they don’t get caught in this trap. (See my story below when I was a young “business owner”)
Do you have any payments that are set up to be “auto-debited” from your account? Things like loan payments, Insurance, Employee Benefits, Lease payments, etc.

No matter what type of business you are in, knowing what is coming into and out of your bank account on a regular basis can help you know what you can do with your cash.

I know you are singing “I work hard for my money” and agree you should be able to enjoy spending it, but spending “other people's money (especially CRA’s) can sure change your tune in a hurry.

P.S. My early lesson what I was a young business owner.
When I was younger, I talked my parents into letting me get a paper route. This was back in the days when customers paid in cash. I paid what I owed for each customers papers and what I had left over was my “profit”. The first time I collected from my customers, I was very happy to have the big pocket of change and thought I should “treat” myself for my hard work with pop, chips, chocolate bars and various other “perks” that I thought I deserved. However, when it came time to pay my “Supplier”, I was dismayed to find there wasn’t enough change left to cover the bill. I had to ask my Mom for some money so I could pay off the bill. I wish I could say this was the last time I found myself in this position, but it took “fifty” years of these kind of “lessons” before I finally started to realize the importance of “cash” management in both my business and personal life.

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