Tentative Course Outline and Contents

Classification of Accounts (for Chart of Accounts)

In accounting, different types of financial transactions (eg, paying telephone bills, copier bills, getting money from sales, getting money from interest income, etc.) are assigned specific numbers (account numbers) which help to record and track those types of transactions. Businesses might create their own list (or chart) of accounts or adopt a chart used by other organizations. In any case, you should have some basic impression of a chart of accounts. The following links will help you.

Setting Up a Chart of Accounts
What Should a Chart of Accounts Include?

Financial Controls
Financial controls exist to help ensure that financial transactions are recorded and maintained accurately, and that personnel don't unintentionally (or intentionally) corrupt the financial management system. Controls range from very basic (eg, using a checkbook and cash register tapes to more complex, eg, yearly financial audits).

Internal Financial Controls for a Small Business
another set of controls


CRITICAL OPERATING ACTIVITIES IN YEARLY ACCOUNTING CYCLE:
Now that you have a basic sense of the overall accounting and financial management process, we'll look at the key parts at the beginning of the overall process, including budgeting, managing cash and credit.

Budget Management
A budget depicts what you expect to spend (expenses) and earn (revenue) over a time period. Amounts are categorized according to the type of business activities, or accounts (for example, telephone costs, sales of catalogs, etc.). Budgets are useful for planning your finances and then tracking if you're operating according to plan. They are also useful for projecting how much money you'll need for a major initiative, for example, buying a facility, hiring a new employee, etc. There are yearly (operating) budgets, project budgets, cash budgets, etc. The overall format of a budget is a record of planned income and planned expenses for a fixed period of time.

Budgeting in a Small Business
What Type of Capital Does Your Business Need?

Managing Cash Flow
As a new business, your biggest challenge is likely to be managing your cash flow -- probably the most important financial statement for a new business is the cash flow statement. The overall purpose of managing your cash flow is to make sure that you have enough cash to pay current bills. Businesses can manage cash flow by examining a cash flow statement and cash flow projection. Basically, the cash flow statement includes total cash received minus total cash spent. Cash management looks primarily at actual cash transactions.


Basics of Cash Management
The Importance of Cash Management
Basic Cash Management Techniques
Basic Cash Management Techniques
cash management techniques
Techniques for Improving Cash Flow

Preparing a Cash Flow Statement
Develop a Cash Flow Statement
Preparing Your Cash Flow Statement
Cash Flow Worksheet cash flow worksheet

Preparing Cash Flow Projections and Forecasts
More information on doing cash flow forecast

Annual Cash Flow Projections
Short-Term Cash Flow Projections

Managing Your Checking Account
For a new business, your check register very likely will be your primary means to record and track cash. Whether yours is a new business or an established business, you'll need to know how to manage your bank account.

Reconciling Your Bank Account

Settting Up and Managing Your Bank Account
You will need to set up a business bank account, which will include a business checking account. Banks often classify and handle business bank accounts differently than private or personal bank accounts. The following links will help you set up your account. Be sure to also see Getting a Banker.


Credit and Collections
One of your biggest challenges in managing cash flow may be decisions about granting credit to customers or clients, and how to collect payment from them.
Debt Collection-Know Your Rights
Debt Collection Basics

Budget Deviation Analysis
You learned above that a budget depicts what you expect to spend (expenses) and earn (revenue) over a time period. Budget deviation analysis regularly compares what you expected, or planned, to earn and spend with what you actually spent and earned. The budget deviation analysis can help greatly when detecting how well you're tracking your plans, how much to accurately budget in the future, where there may be upcoming problems in spending, etc.


ACTIVITIES IN YEARLY ACCOUNTING CYCLE: Financial Statements and Analysis
Financial Statements
To really understand the current and future conditions of your business, you have to look at certain financial statements. These statements are generated by organizing and analyzing numbers from your accounting activities. You should understand the two primary financial statements, the Profit and Loss Statement (or Income Statement) and the Balance Sheet. (Some sources believe that there are other primary statements, too, such as the cash flow statement or change in capital, etc. However, the Income Statement and Balance Sheet are the two standard statements for any business.) The following links will give you an overview of these two key statements, and we'll soon get into them in more detail later on below. Here are several perspectives on the statements.

Introduction to Using Financial Statements
Using Financial Statements
Basic Guide to Understanding Financial Statements
Introduction to Understanding Financial Statements
Understanding Financial Statements



Financial Planning and Analysis -- Profit and Loss (Income) Statements
These "P and L" statements depict the status of your overall profits. These statements include much money you've earned (your revenue) and subtract how much you've spent (your expenses), resulting in how much you've made money (your profits) or lost money (your deficits). Basically, the statement includes total sales minus total expenses. It presents the nature of your overall profit and loss over a period of time. Therefore, the Income Statement gives you a sense for how well the business is operating.

Understanding Income Statements
Income Statement Analysis
Income Statement Analysis
The Income Statement

Financial Planning and Analysis -- Balance Sheets
Whereas the P and L statement depicts the overall status of your profits (or deficits) by looking at income and expenses over a period of time, the balance sheet depicts the overall status of your finances at a fixed point in time. It totals your all your assets and subtracts all your liabilities to compute your overall net worth (or net loss). This statement are referenced particularly when buying or selling a business, or applying for funding. Here are several perspectives.

Basics About Balance Sheets
Understanding Balance Sheets
Balance Sheet Analysis

Financial Analysis
Financial analysis can tell you a lot about how your business is doing. Without this analysis, you may end up staring at a bunch of numbers on budgets, cash flow projections and profit and loss statements. You should set aside at least a a few hours every month to do financial analysis. Analysis includes cash flow analysis and budget deviation analysis mentioned above. Analysis also includes balance sheet analysis and income statement analysis. There are some techniques and tools to help in financial analysis, for example, profit analysis, break-even analysis and ratios analysis that can substantially help to simplify and streamline financial analysis. How you carry out the analysis depends on the nature and needs of you and your business. The following links will help you get a sense for the "territory" of financial analysis.

Financial Planning and Analysis -- Profit Analysis
There are a variety of ways to help determine profitability of your business.
Cost/Volume/Profit Analysis
Calculating Profitability Ratios



Financial Planning and Analysis -- Break-Even Analysis
The break-even analysis uses information from the income statement and cash flow statements to compute how much sales much be accomplished in order to pay for all of your fixed and variable expenses. Fixed expenses are expenses that you'd have regardless of the level of sales of products or services (eg, sales, rent, insurance, maintenance, etc.). Variable expenses are incurred according to the level of sales of products or services (eg, sales commissions, sales tax, freight to ship products, etc.). Break-even analysis can help you when projecting when you'll make a profit, deciding how much to charge for a product, setting a sales goal, etc.
Break-Even Analysis
Break-Even Analysis

Financial Planning and Analysis -- Ratios
There are a variety of ratios that can be used to help determine the current and future condition of a business. The following links provide explanation and procedures for using those ratios. The ratios are produced from numbers on the financial statements. Note that the usefulness of ratios often are from comparing ratios from different time periods in the same business or from industry standards for a type of business, eg, manufacturing, wholesale, service, etc.
Overview of major types of ratios and how they're computed

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