Tuesday Next Talks

1. Tuesday Next Talks ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●

2. Know Your Numbers Tell the story YOU want to tell and put your best foot forward

3. About me monique@equitybydesign.com 415.246.3479

4. E Q U I T Y By Design – three meanings • Financial • Fairness • Justice monique@equitybydesign.com 415.246.3479

5. E Q U I T Y By Design – process • Engage • Question • Understand • Implement • Triple-bottom-line • Yield and do it all . consciously . . with purpose . by design monique@equitybydesign.com 415.246.3479

6. When does it help to know your numbers? • startup • borrow money • sell your business • buy a business • expand your business • bring on investors monique@equitybydesign.com 415.246.3479

7. What does it mean to know your numbers? – strategies & processes • Solid accounting software and processes • Qualified bookkeeper, CPA/EA, and CFO • Current, accurate and complete financial reports • Budgets • Cash flow projections • Key performance indicators (KPIs) • Ratio analysis • SWOT analysis • Monthly reviews, quarterly course corrections, annual visioning with your CFO monique@equitybydesign.com 415.246.3479

8. 1. Solid accounting software and processes • QuickBooks Pro, Premier, or Enterprise 2020 • Industry specific: general business, general contractor, manufacturing & wholesale, nonprofit, professional services, retail • User friendly, forgiving • loads of technical support, lots of 3rd party vendors who can help monique@equitybydesign.com 415.246.3479

9. 2. Qualified bookkeeper, CPA/EA, and financial strategist • Full-charge bookkeeper handles the entire recording and tracking process from source documents through financial reports • Knows what looks wonky and fixes it • Responsive CPA or Enrolled Agent for tax prep and planning • CFO to ”conduct” the accounting team “orchestra” • set up new businesses • Troubleshoot and fix ongoing problems • Help prepare for borrowing and exits monique@equitybydesign.com 415.246.3479

10. 3. Current, accurate and complete financial reports • Balance Sheet, aka Statement of Financial Position • Profit & Loss Statement • Budget vs actuals • YOY (year over year) • This YTD (year to date) compared to last YTD • AR and AP agings • profitability reports for each customer and product monique@equitybydesign.com 415.246.3479

11. 4. Budgets • For each product line • For the overall company • For each department • Establishes not-to-exceed spending benchmarks • Makes visible sales needed to reach profitability targets monique@equitybydesign.com 415.246.3479

12. 5. Cash flow projections • Different perspective than budgeting • Looks at timing of cash receipts and expenditures hitting the bank account • Biggest peace-of-mind tool in the toolbox • Identifies seasonality trends • Possible to have a profitable business model and still have negative cash flow from time to time • Shows bankers that you have a realistic grasp of your borrowing needs and timeline monique@equitybydesign.com 415.246.3479

13. 6. Key performance indicators (KPIs) • Gross profit: sales less cost of goods sold • Net operating profit: gross profit less production and overhead expenses • Percentage of Income: what percentage each expense is to gross income • Most meaningful when KPIs are compared to difference periods, to industry norms, and to other companies monique@equitybydesign.com 415.246.3479

14. 7. Ratio analysis • Liquidity ratios: ability to pay off short-term debts • Current ratio, quick ratio, working capital ratio • Solvency ratios: ability to pay off long-term debts • Debt to equity ratio, debt-assets ratio, interest coverage ratio • Profitability ratios: how well profits are generated from operations • Profit margin, return on assets, return on equity, gross margin ratio • Efficiency ratios: how well assets and liabilities are used to generate sales • Asset turnover ratio, inventory turnover, days’ sales in inventory • Coverage ratios: show ability to make debt payments • Times interest earned ratio, debt-service coverage ratio • Market prospect ratios: for investors to evaluate potential earnings to themselves monique@equitybydesign.com 415.246.3479

15. 8. SWOT analysis monique@equitybydesign.com 415.246.3479

16. 9. Monthly reviews, quarterly course corrections, annual visioning • Monthly: stay in relationship, notice, filter feed • Quarterly: tweak, course correct • Annually: strategize, vision • Feedback analysis with your CFO and CPA/EA monique@equitybydesign.com 415.246.3479

17. How not to make a mess and get honest about your numbers • S-Corp • Cash basis • Manufacturing • 26 years in business • Husband-wife owners • sell to two employees within 5 years monique@equitybydesign.com 415.246.3479

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22. monique@equitybydesign.com 415.246.3479

23. Recommended Resources • www.Investopedia.com for definitions/explanations of financial terms • Buying and Selling a Business: A Step-by-Step Guide, 2nd ed., Robert F. Klueger, 2004 • Death by Meeting: A Leadership Fable about Solving the Most Painful Problem in Business, Patrick Lencioni, 2004 • https://www.scoro.com/blog/financial-kpis-for-financial-kpi-dashboard for interpretations of financial ratio analysis • Set up a Financial Clarity Consultation with me at www.EquityByDesign.com monique@equitybydesign.com 415.246.3479

24. Let’s chat! monique@equitybydesign.com 415.246.3479

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