Apply Legal Requirements & Manage Small Business Finances Lesson 14 Cert IV - M. S. Martin May 2012

Todays Lesson Cash Flow Profit & Loss Statements Cert IV - M. S. Martin May 2012

Cash Flow What is it? Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified period of time. Cert IV - M. S. Martin May 2012

Cash Flow Projections Some say… Cash Flow Projections. Cash flow projections are the key to making wise and profitable business decisions. Cert IV - M. S. Martin May 2012

What You’ve done already In exercise 4 below, you have looked at the cash position of your business already What we want to do now, is just look at cash flow as an item itself, cash in, cash out etc…. And look at forecasting that. Cert IV - M. S. Martin May 2012

Sample Cash Flow Forecast Cert IV - M. S. Martin May 2012

Remember the ATO example Cert IV - M. S. Martin May 2012

How can we use it ? As a prediction tool, for….? Future purchases Future employment Overdraft requirements What else did you have? Cert IV - M. S. Martin May 2012

Other Forecasts There are two main types we would use in a building business are a “Cash Flow Statement” and a “Profit and Loss Statement” A “Profit and Loss Statement” this establishes if the business is in debt or is liquid at any given time – You would typically have to produce one of these when applying for finance from a bank for example Cert IV - M. S. Martin May 2012

Another Definition & Terms Income statement, also referred to as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations Did your business make any money? You can find the answer in your income statement, the financial report that summarizes all the sales activities, costs of producing or buying the products or services sold, and expenses incurred in order to run the business. (Ref: Bookkeeping for Dummies, Lita Epstein) The following examples are from the reference source above Lita Epstein Cert IV - M. S. Martin May 2012

Sample income statement (profit & loss) – single step format Revenues Net Sales $1,000 Interest Income $100 Total Revenue $1,100 Expenses Costs of Goods Sold $500 Depreciation $50 Advertising $50 Salaries $100 Supplies $100 Interest Expenses $50 Total Expenses $850 Net Income $250 Cert IV - M. S. Martin May 2012 $1100 – $ $250

Exercises Cash Flow Cert IV - M. S. Martin May 2012

Exercises – Cash Flow Handout Cert IV - M. S. Martin May 2012

Exercise 1 – Cash Flow Cert IV - M. S. Martin May 2012

Exercise 2 – Cash Flow Cert IV - M. S. Martin May 2012

Exercise 3 – Cash Flow Cert IV - M. S. Martin May 2012

References Competency reference text for ‘Apply Legal Requirements & Manage Small Business Finances’ Web sites as listed below: z1wJOijbRt z1wJOijbRt ow.htm ow.htm Cert IV - M. S. Martin May 2012