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Bob
Parrish CPA, P.C. HOME
(941) 387-0926 ~ It Is:
Introduction
Objectives
Your Questions
What You Will Need
Warning
Intro Summary
Related Information
*Plain English Explanation
Object Restated
Why or How It Works
Alternatives
Cost V. Benefit
Other
Reserved
*Tech Analysis & Citations
Commentary
Law
Regs
Cases
Revenue Procedures
Revenue Rulings
Private Letter Rulings
*TAX KILLERS
Title 1
Title 2
*COST KILLERS
Title 1
Title 2
*PREPARE
FOR ADVISER
Entrance Interview
From Your Other Business, or Financial Records
From Corporation or Organization Records (meetings, etc.)
*DO IT YOURSELF
Action
Checklist - What To Do
PRINT ALL THE REQUIRED DOCUMENTS
OBTAIN THE STANDARD WORKPAPER FORMS NEEDED
FINAL
STEPS
*FINANCIAL ACCOUNTING
Financial
Statement Presentation
Notes to Financial
Statements
How to Make Entries
What Kind of Records to
Keep
Bookkeeping
Methods - Cash, Accrual and Other
How the
Business Entity Affects the Recording
*COMPLIANCE
Title 1
Title 2
*ALERTS - DANGERS
Action Checklist
Alerts & Dangers -
Risks
Asset Protection
Your Defense
*TOOLS
Title 1
Title 2
*SAMPLES
Title 1
Title 2
*REQUIRED REPORTS
Title 1
*CHECKLIST FOR DEPLOYMENT
Title 1
*CHECKLIST FOR MONITORING
Title 1
*INDEX
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Preface ~ Client Letter - What this idea is about ~ Introduction ~
Dear Client:
Management of cash/checking accounts includes accurate balances, knowing short term and projecting intermediate term collections and expenditures, and managing each project for excess cash collections over expenditures.
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Accurate Balances ~ How much cash does my business have?
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Short term collections ~ How much cash does my business need to operate, and when is it needed?
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Short term expenditures ~ How much cash does my business need to operate, and when is it needed?
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Projecting intermediate term collections ~ How much cash does my business need to operate, and when is it needed?
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Projecting intermediate term expenditures ~ How much cash does my business need to operate, and when is it needed?
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Managing/Controlling each projects cash flows ~ Where does my business get its cash, and spend its cash?
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Managing/Controlling overhead (or common area) costs ~ How do my income and expenses affect the amount of cash I need to expand my business?
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Some cash expenditure change with the volume of sales, while others do not ~ How do my income and expenses affect the amount of cash I need to expand my business?
A cash flow forecast can be either your expected results or your actual results. Preparing the amounts to show in each column, expected amounts and actual amounts, will provide the manager a methodology to manage the business transactions based upon the "exceptions". That is look at the transactions which did not match the expectations.
Used properly, this will provide you with the means to keep your business decision-making on track and your inventory purchasing in control. It will also serve as an early warning indicator when your expenditures are running out of line or your sales targets are not being met.
As the manager of your cash, you will have enough time to devise remedies for anticipated temporary cash shortfalls and ample opportunity to arrange short term investments for the business' temporary cash flow surpluses.
Learning Objectives (What You Asked) ~ Your Questions: The following questions will be answered
This Topic OBJECTIVE is or What it Does
What You Will Need
| You Will Need | What or How Much? |
| Time | |
| Materials or Tools | |
| Library | |
| Who This Applies To & Industry Type | |
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| Special Circumstances or Warnings | |
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Engagement Status Letter ~ WARNING!
You have not engaged Bob Parrish CPA PC, Bob Parrish CPA, pro1040, Consulting on line, any related parties, or the ISP to perform any services for you or offer you advice. This entire site is for educational or informational purposes only. You are not to use the forms, concepts, strategies, or knowledge without assistance from a professional. The author, the corporation, the ISP, Bob Parrish CPA, Bob Parrish CPA, P.C. or other parties related to those or this site do not guarantee or warrantee in any manner the suitability, usefulness, accuracy, timeliness, or results of any portions of this site, nor the links contained in this site which link to other areas. At times, information is taken from other sources and is believed to be accurate, but no verification or confirmation is performed. Furthermore, if any federal or state law invalidates a portion of this disclaimer, the other portions still apply. In addition, any allegations or actions are restricted to arbitration only and must be arbitrated by the Better Business Bureau in Sarasota Florida. Reading of these pages constitutes complete acceptance and agreement with all disclaimer provisions on all pages of this site. ....... Monday, July 05, 2004 02:39 PM
Bob Parrish CPA:
License Jurisdictions —
CPA: LA, FL, TX
Insurance: LA, FL, TX
Securities: LA, FL, TX
Securities offered through InterSecurities, Inc. P.O. Box 9053; Clearwater FL 34618-9053; Member NASD, SIPC and Registered Investment Adviser
Summary
| Poor old Sue Started a set of books anew without reading these lines few and now Sue is in a Stew |
Related Information
-
A few closely related topics & pages From Bob Parrish CPA PC (left-click this to expand it):
Plain English Explanation
Object Restated
Why or How It Works
Alternatives
Cost V. Benefit
Other
Reserved
Your Answers
This Topic OBJECTIVE is: What it does Explanation of this topic and how it may affect you (for how it may affect you also refer to : Financial Accounting: Bookkeeping & Financials ~ Compliance - What is required for protection, defense, etc. ~ Alerts & Dangers)
This topic will include two separate approaches to the preparation of a cash flow -
Start with the accrual basis financial accounting statement
Start from the checkbook (the simplified method)
Start of Plain English Section
Why or How it works - Both Sides of the Equation and Examples:
Cash Flow Management?
If you were able to do business in a perfect world, you'd probably like to have a cash inflow (a cash sale) occur every time you experience a cash outflow (pay an expense). But you know all too well that business takes place in the real world, and things just don't happen like that.
Instead, cash outflows and inflows occur at different times, and never actually occur together. More often than not, cash inflows lag behind your cash outflows, leaving your business short of money. Think of this money shortage as your cash flow gap. The cash flow gap represents an excessive outflow of cash that may not be covered by a cash inflow for weeks, months, or even years.
Managing your cash flow allows you to narrow or completely close your cash flow gap. It does this by examining the different items that affect the cash flow of your business. Examining your cash inflows and outflows, and looking at the different components that have a direct effect on your cash flow, allows you to answer the following questions:
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Accurate Balances ~ How much cash does my business have?
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Short term collections ~ How much cash does my business need to operate, and when is it needed?
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Short term expenditures ~ How much cash does my business need to operate, and when is it needed?
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Projecting intermediate term collections ~ How much cash does my business need to operate, and when is it needed?
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Projecting intermediate term expenditures ~ How much cash does my business need to operate, and when is it needed?
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Managing/Controlling each projects cash flows ~ Where does my business get its cash, and spend its cash?
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Managing/Controlling overhead (or common area) costs ~ How do my income and expenses affect the amount of cash I need to expand my business?
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Some cash expenditure change with the volume of sales, while others do not ~ How do my income and expenses affect the amount of cash I need to expand my business?
If you can answer these questions, you are managing your cash flow!
Explanation of this topic and how it may affect you:
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Accurate Balances ~ How much cash does my business have?
-
Short term collections ~ How much cash does my business need to operate, and when is it needed?
-
Short term expenditures ~ How much cash does my business need to operate, and when is it needed?
-
Projecting intermediate term collections ~ How much cash does my business need to operate, and when is it needed?
-
Projecting intermediate term expenditures ~ How much cash does my business need to operate, and when is it needed?
-
Managing/Controlling each projects cash flows ~ Where does my business get its cash, and spend its cash?
-
Managing/Controlling overhead (or common area) costs ~ How do my income and expenses affect the amount of cash I need to expand my business?
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Some cash expenditure change with the volume of sales, while others do not ~ How do my income and expenses affect the amount of cash I need to expand my business?
Profit vs. Cash Flow
The first step is to understand the difference between cash flow and profit. The financial accounting (required by banks, suppliers, investors and market analysts) is not cash flow nor is it what management needs to control the operations of the business enterprise. Cost accounting, activity based costs / activity based management and cash flow are the tools of the manager.
A good way to learn respect for the concept of cash flow is to compare it to the idea of profit. As a business owner, you understand and strive to make a profit. If a retail business is able to buy a retail item for $1,000 and sell it for $2,000, then it has made a $1,000 profit. But what if the buyer of the retail item is slow to pay his or her bill, and six months pass before the bill is paid? Using accrual accounting, the retail business still shows a profit, but what about the bills it has to pay during the six months that pass? It will not have the cash to pay them, despite the profit earned on the sale.
Financial Accounting (profits) are necessary for the non-manager. Financial entails a set of complex and robust rules - just as tax accounting. Although there are similarities among Financial Accounting, Cost Accounting and Tax Accounting ~ none are exactly the same and thereby produce different results, many times drastically different!
As you can see, profit and cash flow are two entirely different concepts, each with entirely different results. The concept of profit is somewhat narrow, and only looks at income and expenses at a certain point in time. Cash flow, on the other hand, is more dynamic. It is concerned with the movement of money in and out of a business. More importantly, it is concerned with the time at which the movement of the money takes place. You might even say the concept of cash flow is more in line with reality! If you use the accrual accounting method, it is helpful to know how to convert your accrual profit to your cash flow profit.
To fully understand the difference, you need to become familiar with:
- accrual accounting vs. cash accounting
- converting accrual profit to cash flow profit
- changes in accounts receivable
- changes in inventory
- changes in accounts payable
- changes in notes payable
- case study — profit vs. cash flow
Accrual vs. Cash Accounting
If you keep your books on the cash method of accounting, this section is something you don't need to concern yourself with. If you keep your books on the accrual method of accounting, then please read on.
Without waging into the details of accrual accounting, understand that it is an essential tool for the financial management of your business. Primarily, it shows the performance of your business over a period of time by matching income and expenses. Regardless of the cash flow, the accrual method of accounting recognizes income when a sale is made. Likewise, it recognizes an expense when the expense is incurred. Most accountants recommend using the accrual method because they feel that it is the most accurate method for measuring how your business is doing. In fact, for some types of businesses, you must use accrual accounting for tax purposes.
However, accrual accounting does have some drawbacks. The main disadvantage of the accrual method is the timing difference it creates between the recognition of income and expense transactions, and the actual inflows and outflows of cash.
The cash method of accounting records the actual flow of cash through a business. It recognizes income when cash is actually collected from a sale. It recognizes expenses when cash is actually paid out, or when a check is written to pay a bill. It is not concerned with matching income and expenses, but rather the actual inflows and outflows of cash. This method of accounting more closely resembles your cash flow.
Case Study — Profit vs. Cash Flow
If you keep your business's books on the accrual method of accounting, you'll have to make some adjustments to determine your actual cash flow. These adjustments are necessary because certain accrual accounting transactions are taken into account to determine your accrual net profit, even though these expenses do not currently require a cash outlay.
The following example looks at the adjustments necessary to convert the accrual profits of Bug Busters Exterminating Service to its cash flow for its year ending December 31, 1998.
To convert its accrual profit to its cash flow profit, Bug Busters will need balance sheets from the beginning and end of the period it wishes to examine. In this case, Bug Busters will examine the period starting on January 1, 1998, and ending on December 31, 1998. Below is the comparative balance sheet provided by Bug Busters' accountant for December 31, 1997, and December 31, 1998:
Bug Busters Exterminating Service
Comparative Balance Sheets
12/31/97 12/31/98 Cash $17,845 $4,375 Accounts Receivable 12,185 27,371 Inventory 6,034 9,133 Property and Equipment 83,239 83,239 (44,826) (48,989) $74,477 $75,129 Accounts Payable $6,977 $7,630 Notes Payable (Bank Loans) 27,500 12,000 $34,477 $19,630 Stockholder's Equity $40,000 $55,499 $74,477 $75,129 The conversion process also requires an income statement for the end of the period under examination. The income statement of Bug Busters Exterminating Service for the year ending December 31, 1998 is presented below. The income statement was prepared using the accrual method of accounting.
Bug Busters Exterminating Service
Income Statement
December 31, 1998Sales $267,189 132,122 Gross Profit $135,067 (115,405) (4,163) Net Profit $15,499 Bug Busters will have to adjust its accrual net profit to determine its cash flow for the year. As a general rule, Bug Busters can convert its accrual net profit using the following formula:
Using the formula above, Bug Busters can adjust its accrual net profit to determine its cash flow for the year:
Adjustment Description Amount $15,499 Add: Depreciation 4,163 Subtract: Increase in Accounts Receivable between 12/31/97 and 12/31/98 (15,186) Subtract: Increase in Inventory between 12/31/97 and 12/31/98 (3,099) Add: Increase in Accounts Payable between 12/31/97 and 12/31/98 653 Subtract: Decrease in Notes Payable between 12/31/97 and 12/31/98 (15,500) ($13,470) Bug Busters' accrual net profit and the net cash flow for the year ended December 31, 1998 report two entirely different results. The income statement prepared using the accrual method of accounting reports a profit of $15,499 for the year. However, in terms of a cash flow, Bug Busters had a negative cash flow of $13,470 for the same year. In other words, Bug Busters spent $13,470 more than it collected during the year.
Case Study - Cash Flow
Cash Flow Spreadsheet (rt click to download)
My Company List of Deposits and Checks December 31, 2000 One Month Job or Project Costs Controllable Overhead Costs Fixed Overhead Costs Marketing Costs Item Cost Item Cost Item Cost Item Cost Commissions or fees Car or Truck 200 Mortgage Interest Advertising 200 Travel Office Expenses 500 Other interest Meals & Entertainment 400 Wages 5000 Profit Sharing - if Defined Contribution Personal Property Tax Wages Costs of Closing 100 Rent - equipment 750 Real Property Tax Promotion 50 Court Reporters Repairs Occupation Tax Business Gifts 200 E&O Insurance 50 Supplies 250 State Bar Filing and other Court Fees 125 FUTA Utilities 250 Investigator State Unemployment Bank charges 50 Legal Expenses 941 Tax Computer Maintenance Library Expenses 200 Travel Insurance Outside Labor Wages Locks Recording Fees 50 Outside Labor Telephone Seminars 300 Postage 100 Trust Acct Expense Software Software Building Rent 500 TOTALS 5825 1800 800 850 Product or Service Pricing There is one attorney that is billable, no other staff is available for billing The sole attorney living expenses are shown in the table above For this case study taxes and other items of the real world are disregarded Number of hours that can be billed per month 130.2 Target Amount of profit per month 2000 Hourly Rates: Project Costs $ 44.74 Controllable Overhead 13.82 Fixed Overhead 6.14 Marketing 6.53 Target Profit 15.36 Avg Billing Rate Required $ 86.60 Case Study Matching - Timing Study
The manager or business owner may discover the expenditures exceed the receipts due to the timing of projects or services performed. The products must be purchased before the cash is received from the customer.
Start of Plain English Section
Technical Analysis and Explanation
Commentary
Law
Regs
Cases
Revenue Procedures
Revenue Rulings
Private Letter Rulings
Commentary
Commentary
-
Accurate Balances ~ How much cash does my business have?
-
Short term collections ~ How much cash does my business need to operate, and when is it needed?
-
Short term expenditures ~ How much cash does my business need to operate, and when is it needed?
-
Projecting intermediate term collections ~ How much cash does my business need to operate, and when is it needed?
-
Projecting intermediate term expenditures ~ How much cash does my business need to operate, and when is it needed?
-
Managing/Controlling each projects cash flows ~ Where does my business get its cash, and spend its cash?
-
Managing/Controlling overhead (or common area) costs ~ How do my income and expenses affect the amount of cash I need to expand my business?
-
Some cash expenditure change with the volume of sales, while others do not ~ How do my income and expenses affect the amount of cash I need to expand my business?
Tax Killers
Title 1
Title 2
Title 3
Title 4
Title 5
Title 6
Cost Killers
Title 1
Title 2
Title 3
Title 4
Title 5
Title 6
Management Info Sys, Decision Support Systems, Activity Based Management and Costing, Cost Accounting)
This topic will include two separate approaches to the preparation of a cash flow -
Start from the checkbook (the simplified method)
Start with the accrual basis financial accounting statement
Start from the checkbook (the simplified method)
|
A Simplified Method |
| Obtain the checkbook
Obtain the most recent bank statement Reconcile the bank's statement to your checkbook balance to obtain an accurate checkbook balance List the deposits and total the list Using a sheet of paper that will provide room for multiple columns make the following headings for each column. Use your management skills to name the columns as these are the categories to enable you to analyze and thereby control your expenditures. COMMENT: You may decide to place subtotals in some of the columns for various reasons - for example knowing totals by supplier, or by a sub-category (sub-set for those with mathematical backgrounds).
|
| COMMENT: The first category "Job or Project Costs" must have both the volume or number of projects billed AND the excess of collections over expenditures to pay for ALL of the other categories, and if not included the owner's life-style and the PROFIT. |
Start with the accrual basis financial accounting statement
Converting Profit to Cash Flow
If you keep your books on the accrual method of accounting, you'll have to make some adjustments to determine your actual cash flow. These adjustments are necessary because certain expenses are taken into account to determine your accrual net profit, even though these expenses do not currently require a cash outlay. To convert your accrual profit to your cash flow profit, you need a balance sheet for the beginning and end of the period under examination.
As a general rule, you can convert your accrual net profit using the following formula:
Depreciation and cash flow. Depreciation is an expense deducted from your business income to reflect the annual cost of assets used in your business. Since the depreciation deduction is purely a "paper" expense, it requires no cash outflow. If you use the accrual method of accounting, depreciation must be added back to your accrual net profit to determine your cash flow profit.
Changes in Accounts Receivable
Do you use the accrual method of accounting, but want to compute your cash flow profit? If so, any increase in accounts receivable must be subtracted from your accrual net profit because it represents sales included in the net profit, but not yet collected in cash. Similarly, to determine your cash flow profit, any decrease in accounts receivable must be added to your accrual net profit because it represents cash collections that are not included in the net profit for the current accounting period.
These adjustments are fairly simple if you think about the reasoning behind the adjustments.
In terms of accounts receivable, when a sale is made to a customer, the sale is recorded and the customer's credit account is increased by the amount of the sale. When the sale is recorded, your accrual income is increased by the amount of the sale, but no cash is collected until the customer pays his bill. To convert your accrual net profit to cash, you must subtract an increase in accounts receivable. The increase represents income that has been recorded but not yet collected in cash.
A decrease in accounts receivable has the opposite effect — the decrease represents cash collected, but not included in income.
Changes in Inventory
Do you use the accrual method of accounting? If so, any increase in inventory must be subtracted from your accrual net profit amount to determine your net cash flow profit. The increase in inventory represents an expense that was paid but not yet subtracted from your accrual net profit. Under the mechanics of accrual accounting, the purchase of inventory is not considered to be an expense until the inventory is sold. In terms of a cash flow, you've already paid for the inventory; therefore, it must be subtracted from your accrual net profit.
Similarly, a decrease in your inventory amount must be added to your accrual net profit to determine your net cash flow. The decrease in inventory represents an expense subtracted from your accrual income to determine your accrual net profit. However, no cash left your business in this accounting period for the expense reflected by the decrease in inventory
Changes in Accounts Payable
If you use the accrual method of accounting, any increase in accounts payable must be added back to your accrual net profit to determine your cash flow. Under the accrual method of accounting, an account payable is recorded and an expense is increased when you receive a bill. Therefore, your accrual net profit is reduced by an expense that has not yet been paid in cash. Adding back the increase in accounts payable will adjust the accrual net profit so that it does not reflect the amount of expense not yet paid with cash or with a check.
A decrease in accounts payable must be subtracted from your accrual net profit to determine your cash flow. The decrease in accounts payable represents the net cash that was paid out of your business but not reflected as an expense in determining your accrual net profit for this accounting period. Under the mechanics of accrual accounting, the expenses associated with the accounts payable were recorded at the time the bills were received.
Changes in Notes Payable
If you use the accrual method of accounting, an increase in the amount of notes payable (bank loans) must be added to your accrual net profits to determine the cash flow of your business. Under the accrual method of accounting, a loan is recorded by increasing the amount of cash received from the loan, and increasing the amount of notes payable. No part of this transaction is reflected in your accrual net profits. Therefore, to determine your cash flow, you must add the increase in notes payable to your accrual net profit to reflect the real change in your cash balance.
Similarly, a decrease in the amount of notes payable must be subtracted from your accrual net profits. Like the increase in notes payable, no part of the transaction to record a principal payment on a note payable is reflected in your accrual net profit. Therefore, it must be subtracted from your accrual net profit to determine the real effect on your cash flow.
Prepare for Your CPA or Attorney (or prepare for doing this yourself)
Entrance Interview
From Your Other Business, or Financial Records
From Corporation or Organization Records (meetings, etc.)
About the Preparation Procedures
If you have decided this task must be done, the first procedure is to be certain you have all the facts important to this topic. So that you may know the value, to you personally, of this topic you must have facts of your circumstances. So that you may comply with applicable rules, you must have all the facts. Factual research is time consuming and if not performed wisely will be very expensive if not performed properly, and thoroughly. IF you decide to make this a do-it-yourself project you should seek the advice of a professional qualified in your jurisdiction to assist you with defining important information and then to overview the information you have gathered.
What to gather - an Organizer and Prepare for your CPA, Attorney or Financial Adviser
Be prepared to inform the adviser about unusual transactions during the period the cash flow is to apply to.
Be prepared by bringing in the information as required. For assistance and examples of the records or documents required for this project read the other items in this section.
Be prepared for the exit interview by making notes of your concerns and question before you attend the exit interview.
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Check stubs
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Bank statements
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Canceled checks
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Deposit slips
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Documents to explain transactions that are not a part of the sales function or transactions that are not a part of operating expenses - such as repayment of debt, etc.
Usually the customer transactions will need to be included in the cash flow. Bad debts are exceptions to this rule of thumb. Why? Because using the cash flow approach to management reporting means that only actual payments received from customers is to be included in the receipts/"income". If a customer check is returned for insufficient funds, then you must determine whether the check cleared within the month or other period you are preparing the cash flow for. If the check is returned and then cleared within the same period - you may decide to ignore the return and the subsequent clearing. If the check has not been made good by your customer before the closing of the period, then you will probably want to record the insufficient funds check so that the cash flow report will reflect your correct balance at the end of the period.
Examples of signed documents are -
Promissory notes
Leases
Lease-Purchase Arrangements
From Your Other Business, or Financial Records
Examples of Other Business or Financial Records documents are -
Inventory lists with the total amount of inventory
Payroll tax returns
Payroll records
From Corporation Records or Organization Records (meetings, etc.)
Some examples of corporate records might be -
Loan Documents approved
Group health or medical plans
Gather the information - sort all documents into the above grouping - make notes to clarify or explain the documents where necessary - present to the adviser, or retain for yourself if this is a Do It Yourself project
Start of Preparing For You CPA Section
Do It Yourself - Forms Required to Be Filed, Checklists, Etc.
DO
IT YOURSELF
Action
Checklist - What To Do
PRINT ALL THE REQUIRED DOCUMENTS
OBTAIN THE STANDARD WORKPAPER FORMS NEEDED
Title 1
Title 2
Title 3
Title 4
Title 5
Title 6
How to do this - What to Do
GENERAL SETUP & STARTUP
PRINT FORMS AND DOCUMENTS NEEDED
PRESENTATION STANDARDS
STARTING - FIRST THINGS FIRST, OBTAIN WHAT YOU NEED
OBTAIN THE ORGANIZER AND BE CERTAIN ALL INFORMATION IS AVAILABLE
OBTAIN AND SORT THE INFORMATION
OBTAIN THE STANDARD WORKPAPER FOLDER SETUP
OBTAIN THE STANDARD PRESENTATION LAYOUT
OBTAIN & OPEN ALL STANDARD DOCUMENTS OR WORKPAPERS
OVERVIEW & BECOME FAMILIAR WITH THE ENTRANCE INTERVIEW FORM
OVERVIEW THE LIST OF INFORMATION AND CLIENT OR BUSINESS RECORDS NEEDED
START THE REQUIRED COMPUTER PROGRAMS
OBTAIN THE CHECKLISTS IF NEEDED AND WORK ON THE JOB BY EACH TYPE OF ACTIVITY OR EVENT
OBTAIN THE STANDARD WORKPAPER FORMS NEEDED
LIST OF THE STANDARD FORMS AND W/P NEEDED
OBTAIN THE DOCUMENTS FOR THIS JOB
PLACE BLANK FORMS IN THE CORRECT SEQUENCE
GENERAL & FOR ALL JOBS
Instructions for finalizing and completion - for example instructions for the mailing of forms to the IRS
Actions Checklist
Report Cover Letter
Required Documents and attachments
DOING THE WORK
PRINT ALL THE REQUIRED DOCUMENTS OR MAKE COPIES AS NEEDED
DETERMINE THE CORRECT PRESENTATION STANDARD TO USE
ENGAGEMENT LETTER AND DISCLAIMER
PRESENTATION IN GENERAL
WHAT THE ENGAGEMENT IS LIMITED TO
WHAT SERVICES WERE PERFORMED
HOW THIS HELPS & BENEFITS
4 WAY TEST APPLICATION
Is it the TRUTH
Is it FAIR
Will it build GOODWILL and BETTER FRIENDSHIPS
Will it be BENEFICIAL to all
OVERVIEW THE WORK
BEFORE FINALIZING THE WORK PROCESS CONSIDER THE FOLLOWING
Compliance
Paying Bills or other events
The professional should perform functions the client does not have time for
The professional should perform necessary functions the client staff does not have training for
Reduce Costs
Reduce Risks
Setting Goals or objectives
Setting methods for monitoring
Setting dates, methods & procedures for follow-up
Setting guidelines for defining when variances from the guideline warrant policy or procedure changes
Identify the policies or procedures that need to be changed to accomplish the goal or objective
FINAL OVERVIEW BEFORE THE JOBS IS ENDED & CLOSED
LOOK AT THE ORIGINAL QUESTION - has it been answered, were more questions added?
THE ANSWER - limit the answer to a short paragraph of about 7 sentences. Did this solve the issue? The ANSWER is not considered the SOLUTION
THE SOLUTION - understand the objective or goal and restate it. Were the goals met? What might prevent obtaining the goals. Do the benefits outweigh the costs? Reduce Costs? Reduce Risks? Setting Goals or objectives:
Setting methods for monitoring
Setting dates, methods & procedures for follow-up
Setting guidelines for defining when variances from the guideline warrant policy or procedure changes
Identify the policies or procedures that need to be changed to accomplish the goal or objective. State Remedial Solutions and Preventive Solutions.
ACTIONS - checklist, calendar, columnar presentation showing separate columns for Client, CPA, Broker, Bookkeeper, Lawyer, Insurance Agent, etc.
COST v. BENEFITS ANALYSIS
PROPOSAL
FACTS DISCOVERED & USED
COMPUTATIONS & REPORTS
TECHNICAL ANALYSIS WITH CITATIONS AND AUTHORITY
FORMS - agreements, contracts, trusts, tax forms, financial reports, management information reports, policies or procedures
REQUIRED ATTACHMENTS
Overview - look at the steps required and the steps performed. Are there unusual items? Are there exceptions or adverse results of the procedures performed? Find resolutions for all unusual or adverse items.
Compliance - has compliance "substantially" been met. That is no "material" adverse results?
Math Check
Proof and spell check
Theory & overview by someone not performing the procedures
Close the case and archive it.
Financial Accounting - Bookkeeping and Financial Statements
Financial Statement Presentation
Notes to Financial Statements
How to Make Entries
What Kind of Records to Keep
Bookkeeping Methods - Cash, Accrual and Other
How the Business Entity Affects the Recording
Financial Statement Presentation
Financial Statement Presentation requires the use of "Generally Accepted Accounting Principals". Since the cash flow format suggested here does not comply with those principals, this section does not apply. The fact the financial or accounting industries do not approve this me4thod does not subtract from its usefulness to management.
The fact is - management many times must have reports that are designed for the use of internal management, not that for bankers, investors or creditors. This is one of thsoe reports. The cash flow may be one of the most usefull reprots for a manager. IF the manager is to receive only one reports - make it the cash flow report.
Rule - Manage Your Cash!
Back to Start of Financial Accounting: Bookkeeping & Financials
Compliance Requirements - Requirements, Defense, Protection, Etc.
Title 1
Title 2
Title 3
Title 4
Title 5
Title 6
Compliance Checklist
Keep in mind - this report does not comply with generally accepted accounting principals nor dos it comply with tax reporting.
Back to Start of What is required for protection, defense, etc.
Alerts and Dangers
Action Checklist
Alerts & Dangers - Risks
Asset Protection
Your Defense
Title 5
Title 6
Back to Start of Alerts & Dangers
Back to Start of Alerts & Dangers
Back to Start of Alerts & Dangers
Back to Start of Alerts & Dangers
Tools - Spreadsheets - Documents - Checklists - Organizers
TOOLS
Spreadsheets
& Math
Spreadsheets & Computations
Business Cash Flow Sensitivity
Combination Deposits and Checks Journal (c)
Back to Start of Spreadsheets & Math
Sample Agreements - Trusts - Etc.
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The following is a sample of a cash flow report:
Monthly Cash Flow Projection Name of Business: Name of Business: Pre-Start-Up YEAR MONTH Position Estimate Actual 1. Cash on Hand 1,000 1,000 2. Cash receipts (a) Cash Sales 1,000 500 (b) Collections from Credit Accounts (c) Loan or Other Cash injection 3. Total Cash receipts 1,000 500 4. Total Cash Available 2,000 1,500 5. Cash Paid Out (a) Purchases (Merchandise) 100 100 (b) Gross Wages (c) Payroll Expenses (d) Outside Services 50 50 (e) Supplies (Office & operating) (f) Repairs & Maintenance 25 25 (g) Advertising (h) Car, Delivery, & Travel (i) Accounting & Legal (j) Rent (k) Telephone (l) Utilities (m) Insurance (n) Taxes (o) Interest (p) Other Expense (specify) (p) (q) Miscellaneous (r) Subtotal 175 175 (s) Loan Principal Payment (t) Capital Purchases (u) Other StartŠup Costs (v) Reserve &/or Escrow (w) Owner's Withdrawal 6. Total Cash Paid Out 175 175 7. Cash Position (end of month) 1,825 1,325 Essential Operating Data (nonŠcash flow information) A. Sales Volumes (Dollars) B. Accounts Receivable (end of month) C. Bad Debt (End of month) D. Inventory on Hand (End of month) E. Accounts Payable (End of month) F. Depreciation
Back to Start of Contracts, Trusts, etc.
Required Reports
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Back to Start of Reports Required
Checklist for Deployment
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Checklists for Deployment
Coming Soon
Back to Start of Checklists - Deployment
Checklist for Monitoring
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Coming Soon
Back to Start of Checklist - Monitoring
Index
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Click on the text -- (a) to expand or collapse the outline if the text has no underline OR (b) to jump to the topic if the text has an underline
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Analyses
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Plain English Analysis - Your Answers
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Do It Yourself
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How To Do This
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Increase Wealth
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Information Sources
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Introduction
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Procedures
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Tools
Contact Information
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