1. FINANCIAL RESOURCES MANAGEMENT
Explain how budgeting relates to financial planning
Describe two kinds of financial reports prepared by businesses

2. Financial Plan
An outline of your expenses, needs, and goals and how you expect to meet them
One reason small businesses fail is they do not manage their finances properly.
An important part of a business plan.
Must include a way of keeping records on income and expenses.
Helps keep business on track and determine what its financial state is at any given time.

3. Purchasing Assets
Asset – any property of item of value that your business owns (cash, equipment, buildings, supplies, inventory, land)
Research options, analyze and compare prices, get the best item for your money
Determine the method you will use to purchase the items
Cash, borrow money

4. Accounting Requirements
Recognize the financial records you need to keep
Financial forecast – an estimate of what business conditions will be like in the future
Plan for changes in the economy that might affect your business
Be conservative and estimate your income on the low side and your expenses on the high side
Using this current information you can make informed, reasonable decisions.

5. Accounting
The systematic process of recording and reporting the financial position of a business
Accounting records and reports help a business operate efficiently.
Tracks how much the business earns and spends
Financial manager – the person in charge of a business’ financial planning, funding, and accounting
Manage the funds and make sure the business is meeting its financial obligations
Find sources for additional funds
Plan long-range financial goals; outline the information you need to make decisions for the future

6. Budgeting Profit – what is left over after expenses are paid
Budget – a written plan of what you expect you income and expenses to be over a certain period of time
Helps you predict how much money you’ll need
Helps control your spending
Compare it periodically to your actual income and expenses to avoid financial problems
Income(Revenue) – the money a business takes in or receives
Most revenue or income comes from sales of products or services
Credit – many sales not paid for 30 days or longer (is this still true?)
Statement of Cash Flow – shows actual cash a business receives and has available on a daily basis
Expenses – operating costs of the business
Employee wages, benefits, advertising, rent, utilities, supplies, etc.

7. Start-up Budget – a plan for your income and expenses from the time you start the business to when it makes a profit
Money for equipment, supplies, rent, paying employees
Money for everything you might need for personal expenses
Cash Budget – a plan for the actual money you expect to spend and earn on a daily, weekly, or monthly basis
Salaries, utility bills, rent
Tells you how much money is needed on hand at all times for day- to-day transactions
Operating Budget – a plan for how much you expect to spend and earn over a given period of time
Covers the total amount of regular transactions as well as other operating expenses (advertising, taxes, new equipment)
Tells you how much money you need to keep you business running over the long term
Gives a picture of the finances and becomes a “road map” for the company

8. Financial Records
To keep track of how your business is actually doing financially, you need to keep accurate written accounts.
tells how well you’re sticking to your budget and what your profits or losses are during a certain period.
Investors and creditors also want to see your financial accounts
Fiscal year – an accounting period which reports for one year
Summarize the year with an income statement and balance sheet

9. Activity…..
Calculate the net profit or loss for the month for Galaxy Comic Books: (use equation)
Cash sales - $3560
Charge sales - $1240
Other revenue - $165
Salaries - $2450
Advertising - $200
Rent - $550
Supplies - $120

10. Income Statement
A financial statement that shows revenues, expenses, and net income (profit) or loss for a period of time.
Usually covers a period of 6 months or a year but may be shorter
End-of-year statement shows how the business did for the entire year
Basis for payment of taxes and decision-making

11. Balance Sheet
A financial statement that lists a business’ assets (what a company owns) and liabilities (what a company owes)
Shows what the business is worth on a particular date, usually the end of a year
Shows owners equity (value of the owner’s investment in the business (also called net worth)
Owner’s equity equation:
Assets – Liabilities = Owner’s Equity

12. Overland Design Company Income Statement For the Year Ended December 31, 2012
Revenue
Cash Sales $ 38,200
Charge Sales ,600
Other Revenue ,900
$231,700
Expenses
Salaries and Wages $ 70,800
Marketing ,250
Administrative Costs ,900
Materials and Supplies ,800
Other Expenses ,100
Total Expenses ,850
Net Income $ 62,850

13. Ex. Schribner’s Automotive, Inc. Balance Sheet
In a balance sheet, both sides of the statement must be in balance
Right-hand side shows the total of liabilities and owner’s equity to show that they equal the value of the assets on the left-hand side
Ex. Schribner’s Automotive, Inc. Balance Sheet
December 31, 2012
ASSETS
LIABILITIES
Cash
$35,850
Accounts Payable
$103,300
Investments
40,000
Payroll Taxes
22,000
Accounts Receivable
42,375
Mortgage
126,800
Buildings/Equipment
370,000
TOTAL LIABITIES
$252,100
Owner’s Equity
$236,125
Total Assets
$488,225
Total Liabilities and Owner’s Equity

14. Maintaining Financial Records
Accuracy
Current
Technology use
Data files transfer easily
Software capabilities
What-if comparisons
Mathematical calculations
Updates records
Comparisons