1. Unit 8 Financial Issues & Accounting Records Small Business Operations

2. Determine Start-up Capital Needs  Every business is different and has its own specific cash needs at different stages of development.  Some businesses can be started on a shoestring budget, while others may require considerable investment in inventory or equipment. Source: www.sba.govFrameworks 8.2.1 It is vital to know whether or not you will have enough money to launch your business venture. Photo courtesy of Sara McLeod class of 2013 Trent Sanders and Sara McLeod Operate their Business

3.  To determine your startup costs, you must identify all the expenses your business will incur during its startup phase.  Some of these expenses will be one-time costs, such as the fee for incorporating your business and the price of a sign for your building.  Some expenses will be ongoing, such as the cost of utilities, inventory, insurance, etc. Source: www.sba.govFrameworks 8.2.1 Determine Start-up Capital Needs

4. Capital Expenses Vs. Operating Expenses  Capital expenses are long-term investments in land, buildings, and equipment.  Operating expenses are the costs of day-to- day operations. These include wages, utilities, insurance, supplies, and advertising. Source: Marketing, 3e, pages 559-560Frameworks 8.2.2

5. Sources of Start-up Capital  Equity capital or owner capital is the small business owner’s personal financial contribution to the business.  Debt capital or creditor capital is money that others loan to the small business. Source: Business Principles and Management, 12e, page 421Frameworks 8.2.3 Most small business owners will use a combination of equity capital and debt capital to start their business.

6. Create a Start-up Budget  A start-up budget projects income and expenses from the beginning of a new business until it becomes profitable. –Create a start-up budget for the school based enterprise. Frameworks 8.2.4Source: Business Principles and Management, 12e, page 421

7. The Importance of Finances  The small business will generate revenue – the money received from the sale of products and services. –Revenue minus All Costs = Profit or Loss –If the School Based Enterprise generated $478 in sales during the week and all expenses were $276 what would the profit be for the week? $202 Frameworks 8.3.1Source: Marketing, 3e, page 556

8. What is the “Z” Report?  The “Z” report is created by the point-of-sale terminal and lists all cash sales, credit sales, and total revenue for the completed shift.  Interpret a “Z” report for the School Based Enterprise. –What was the amount of the beginning change fund? –What was the amount of credit sales? –What was the amount of cash sales? –What was the total sales for the day? –How much money should be in the cash drawer? Frameworks 8.4.2

9. Financial Statements  A financial statement is a detailed summary of the specific financial performance for a business or a part of a business. –An income statement reports on the amount and source of revenue and the amount of and type of expenses for a specific period of time. –A balance sheet describes the type and amount of assets, liabilities, and capital in a business on a specific date. Frameworks 8.4.1Source: Marketing, 3e, pages 564-565

10. The Balance Sheet  The balance sheet includes 3 categories: –Assets include the things the business owns. –Liabilities are the amounts the business owes. –Capital is the difference between the amount of assets and the amount of liabilities, this is the value of the business. Frameworks 8.4.1Source: Marketing, 3e, page 565

11. Accounts Receivable Vs. Accounts Payable  Accounts receivable are sales for which the small business has not yet been paid – this is money owed to the business. Marketing, 3e, page 576  Accounts payable is the record of money owed and paid to other businesses/vendors or creditors. Business Principles and Management, 12e, page 390 Frameworks 8.5.1