June 24 My “Favorite Class” with Melinda Ailes from Massachusetts Small Business Development Center (MSBD) By Erin Poyant

During yesterday’s class I noticed two themes that are so prominent in Yoga and are also connected to the importance of Financial Statements & Projections. Those themes are: practice and non-attachment. I learned that it so important to have complete and organized finances to prove success. To accomplish this I must practice by starting somewhere, record the first number, make the first financial statement and then use it to understand myself and my business. The financial statement is a reflection of the living, breathing, organism that is the business. There will always be ups, downs, wins and losses. By practicing non-attachment I will learn from the information and make adjustments and changes needed in order to do my best and make the business grow instead of quitting. I learned that the importance of doing financial projections is to look at how to determine pricing and to understand how to make decisions in the business.

Melinda filled our minds with information about Financial Statements, Projections and External Sources of Start-Up and gave us some helpful resources. Here are some highlighted tips from Melinda: When estimating always over estimate expense and underestimate revenue. Set a goal of a date to break even. Learn how to read my own books. Equation for Assets: Assets=Liabilities (owe) + Equity (invested or retained). The higher proportion of debt to equity equals greater the risk. Ask people who have done what you are doing and if they say no, ask again. Most loan lenders ask for 25%. Use 4.25 weeks in a year when estimating expenses. Write down your estimates to test them and then set goals. Thanks to Melinda’s positive encouragement, humor, information and support I am confident that all of us will have a handle on our finances and use them to prove success! Here are some flashcards for you to learn the language of finances.

sources and uses : A sources and uses analysis provides a summary of where the capital used to fund an acquisition will come from. The sources are where the money comes from for example: loans, friends, and your pocket. The uses are what this capital will purchase.

working capital: The capital of a business that is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. Or What you need to start your business to keep you floating.

CFIMITYM

Melinda: Cash Flow Is More Important Than Your Mother

David: Can’t Find Income Can I Take Your Money

Profit and Loss Statement = P&L = Income Statement: The profit and loss statement summarizes the revenues, costs and expenses incurred during a specified period. These records provide information about a company’s ability or inability to generate profit by increasing revenue, reducing costs or both. Used for taxes not cash flow.

Fixed Cost v’s Variable Cost : Fixed Expenses- that do not change and have to be paid by a company no matter what; example: rent. Variable Expenses- that change in proportion with production output; example: materials.

Break Even: When profits are equal to the cost.

Cash Flow: “go iners and go outers” The total amount of money being transferred into and out of a business. This includes when the transfer happens and what is being transferred.

Balance Sheet: “A snapshot in time” Statement of the assets, liabilities, and capital of a business at a particular point in time, detailing the balance of income and expenditure over the preceding period. Complete before closing your books.

Liquidity:The availability of cash to the business. How you are able to pay your bills. How much bigger are your assets then your liabilities?

Leverage: Proportion of debt to equity.

Sources and Uses: The flow of funds report provides a mechanism for reporting how a business performs during an accounting period.

Intangible Assets: Can’t be touched, it is not physical in nature. Example; branding, intellectual property.

Debt: Borrow a specific amount of money that you are expected to pay back by a specific time.

Equity: Borrow money from someone who then owns a percentage of the business and expect to be paid back 10x what you borrowed.