$$ ACCOUNTING $$

Accounting – Why It’s Important One of the reasons Franchises fail?  They DON’T KNOW if they are making a profit!

How Do I Get Started?  Purchase QuickBooks - Most current version

How Do I Get Started?  Download the QuickBooks Template File from the Ugville.com website  Under the Resources tab (using the search resources box), search “QuickBooks Template – 2006 (Win)”. Also a Mac version available.  Download the Accounting Manual from the Ugville.com website  Under the Resources tab (using the search resources box), search “Accounting Manual”.

What Next? Read Chapter One of the Accounting Manual to Complete the Setup (“Getting Started With Quickbooks”) Install QuickBooks on Your Computer Open QuickBooks – DO NOT Follow the Setup Wizard

Primary Accounting Reports Balance Sheet – Summary report indicating what you own, what you owe and what the worth of the business is – snapshot in time  Assets – Purchased Houses, Rehab & Closing Costs of Purchased Houses, Company Vehicles & Other Fixed Assets  Liabilities – Trade Payables, Loans From Owners, Mortgage Loans, Short Term Loans  Equity – Owner Contributed Capital, Retained Earnings  The Accounting Equation Assets = Liabilities + Equity Equity = Assets - Liabilities

Primary Accounting Reports Income Statement – Summary report indicating the revenue, expenses and operations of the business for a defined period of time  Revenue – House Sales, Assignment Income, Rental Income  Cost of Goods Sold – Cost of Sold Houses, Rehab & Closing Costs of Sold Houses  G&A Expenses – Office Rent, Marketing, Insurance, Wages, Travel & Vehicle, Other  Gross Profit = Revenue - COGS  Net Profit = Revenue - COGS – G&A Expenses

Sample Balance Sheet

Sample Income Statement

HomeVestors Invoicing Schedule  Transaction Fees  To be included on HUD, paid at closing by title company  Invoiced by HVA the day after the closing is reported  Monthly Fee  Auto drafted on 10 th day of the following month  $350 per month  Banking information required (monthly fee authorization form)  No Monthly Fee due if Purchase Closing reported  Advertising Net Amount Due, Arch minutes  Monthly between 10 th – 15 th of the month

Unpaid Invoice Procedures  What happens if I do not pay my HVA bills?  I will be placed on the “Show stoppers” report.  I will not be able to get future leads while on the report (regardless of how much advertising money I send in).  I will not be able to get financing from HVA.  I will get a call from HVA collections.  It could lead to a default notice.  What happens if I am on the “Show stoppers” report twice in the same year  I will not be able to get financing from HVA for a 6 month period.

Transaction Fees  Must be paid on the HUD at time of closing  Purchase Transaction Fee  $  Sale Transaction Fee  3% Transaction Fee + 2% Associate Royalty Fee  Hold Transaction Fee  Same as Sale Transaction Fee, use 85% of ARV as Sales Price  Assignment Transaction Fee  10% of Assignment Fee OR Sale Transaction Fee calc, whichever is LOWER, minimum $  Marketing Fund Fee  $ (paid on HUD at sale or assignment of property)

Transaction Fee Levels LevelDollarsUnits Rate 1 $0 - $1,000, % 2$1,000,001 - $2,000, – % 3$2,000,001 - $3,000, – % 4$3,000,001 - $4,000,00031 – % 5$4,000,001 - $5,500,00041 – % 6$5,500,001 - N/A 0.80% ** Level 1 – 3 is cumulative ** Annual Cumulative

Assignment Transaction Fee Example Purchase Price = $90,000 Assigned Sales Price = $100,000 Assignment Value = $ 10,000 Full Sale Price: Assignment Transaction Fee: $100,000 x 3% = $ 3,000 Assignment Royalty Fee:$100,000 x 2% = $ 2,000 Marketing Fee: $ 225 Total $ 5,225 Assignment Fee: Assignment Transaction Fee: $10,000 x 10% = $ 1,000 Assignment Royalty Fee:$10,000 x 10% = $ 1,000 Marketing Fee: $ 225 Total $ 2,225 Assignment to/from another Franchisee – pay ½ fees

How to report an Assignment to another Franchisee Seller report as an Assignment (change contract status) – pay ½ fees Buyer report as a Purchase – pay ½ fees ($250) Buyer report final sale as a Sale Transaction – pay ½ fees (specific to your rate)

Example Invoice

Example Statement

Example Advertising Statement

Monthly Fee Authorization Form