Once you have the Income Statement prepared, see The Income Statement: How to Read it post, it is time to compare your results from the current month to the prior month. Using the same logic, compare your current results to the same month of the prior year. In what areas did your business improve? What [...]

Many business owners follow the motto that “cash is king.” And while cash is extremely important, the ending balance in your bank account does not tell you much about how you generated or used cash. Looking only at your cash balance may cause you to miss some key indicators on how your business is doing. [...]

Gross profit and profit margin sound very similar, yet they are very different and serve distinct purposes for analyzing your business. Gross profit is found by taking the net sales minus the cost of goods sold. For example, to find gross profit, a dressmaker make add up all of the receipts for the dresses sold, then [...]

Most business owners are not accountants and know enough about Net Income and/or Cash Flow to get by. Your financial statements are full of a wealth of information and each statement tells its own story of what is happening in your business. While cash is King, the balance in you checking account doesn’t tell you [...]

A Pro Forma is an estimated financial statement, usually the Income Statement (aka Profit and Loss Statement). Entrepreneurs prepare a pro forma for many reasons, but the main one is to obtain financing either from a bank or an investor. As with most everything, the pro forma is only valuable if the information used to [...]

When you purchase supplies the transaction is an easy one from an accounting stand point. You use cash, credit card or vendor credit to make the purchase and report the supplies as an expense on your income statement. Most business transactions in accounting make sense. But one that trips up business owners and students is [...]