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Budgeting provides a detailed understanding of the profit dynamics and financial structure of your business and helps you anticipate changes in the future. Budgeting makes you focus on activities you must develop to enlarge profit and gets you ready for the period to come. A well thought through profit budget highlights what fluctuations you can expect in your cash flow.

The cash flow forecast deduced from your budget will tell you what cash you will or won’t have to invest in growing the business. To track your cash flow accurately the best tool to use is small business accounting software which should give you the reports you need to compare your actual with budgeted performance.

Increasing your profit doesn’t necessarily mean you will have a healthier cash flow . Do not be deceived by this point

You must vigilantly track and immediately investigate any changes in your actual cash flow from profit. Any changes from what you expected] you find should be analysed to discover if you have an opportunity or a problem.

Most small business accounting software will let you run summary and detail reports to help you see the critical numbers.

Expenses consume cash and it is often the case that the higher the sales the higher the cash burn as the business uses more resources to fuel the growth in sales.

You should enter all expenses and sales activity into your small business management software as soon as they occur so as you can report an accurate forecast and make corrections or adjustments in line with your budget.

Cash flow forecasting and budgeting are arguably the two most important tasks you need to master to operate a successful business and you cannot do this without good systems and solid discipline.

All the best with your business and the future.

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The next section down, directly underneath the Income section and mostly in the case of folks who sell Products is the Cost of Goods line. Reports in most small business accounting software will display this as COGS

This line represents the actual costs (COGS) associated with the Products you sold in the period you report from your small business accounting software. The purpose of this line is to help folks who sell products calculate the gross margin or gross profit, in other words the amount of profit made after taking into account the costs directly associated with acquiring and selling the goods.

The gross margin (a.k.a gross profit) is calculated by Income minus COGS. Gross Margin is often expressed as a percentage and to calculate the gross margin and express it as a percentage just divide the Gross Margin by the value of sales you made in that period. Now if you’re a Services Business life is a little more complex if you want to determine the Gross Margin you make on Services (and you should). The reports in some small business accounting software systems will help you determine this.

Head over the to the Small Business Heroes channel in Youtube for a more in depth explanation. The COGS row is always followed by the section called Operating Expenses this details the running costs. The business running costs are known as the Operating Expenses and they tell us what was spent where and when.

This section is often divided into major groups such as Sales and Marketing, General and Administration, Research and Development. As you can see these sections represent major functions or centres of activity in a business. These “expense lines” tell you what expenses where incurred in a given period.

The balances in these sections are derived from Expense Accounts and it’s really important that you know and understand that there are two major types of Expense in any business. These are Fixed and Variable expenses.

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If you are running a small business or using small business accounting software it’s vital that you master reading and understanding your profit and loss statement. And if you are stuck You will find videos on Youtube in the Small Business Heroes channel to help you understand this report or statement.

The profit and loss statement reports how much you’re selling, how much you’re spending and how much profit you are or aren’t making over a specific time period.

The Profit and Loss or P&L is often referred to as the Income statement, it tracks and reports the financial activity of your business over a period such as a month or a quarter.

Here is a simple explanation of how the profit and loss report is assembled and how it’s key components work.

Here I share with you how the profit and loss is generally presented in reports created by small business accounting software

I will also discuss the mathematics used in the profit and loss to express the bottom line or how much profit the business is making.

Just one important point before I begin. Get it clear in your mind now – The profit and loss will NEVER tell you how much cash you have. Sales generate cash sure but profit is an entirely different matter and is never going to be an indicator of how much cash you have. The balance sheet tells you the amount of cash you have available and the financial position of your business.

Always first is Sales (in other words how much you’ve sold),it’s also known as Income or Revenue and is always shown at the top of the profit and loss report generated by your small business accounting software The balance or amount on this line is derived from your Income Accounts.The Income accounts contain a detailed history of the products and services you have sold.

So if you’re reporting by month and in March you invoiced or sold 1,000 worth of Products or Services. This line will show a balance of 1000.00 for March.

Each line in this top section represents the sum of the transactions over the time period you specify when you run the profit and loss report

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In my challenge to create instructional videos for people using my alternative to small business accounting software such as Quickbooks or Sage I know I have just about mastered the art of making videos like the one above (one hour to produce) that can be sold or used to promote products and services on the internet. Selling information online has been around for years, here I show and walk you through the easiest way to infuse your skills into digital content and sell it to a worldwide audience of internet users. I would recommend you take the time to design and create your own product (digital content) as the margin you earn will be higher and you have the added benefit of learning from your customers what you could do to refine your product and maybe sell more.

YouTube, iTunes, Podcasting, iPods and IPhones are all terms I know you will be familiar with and it is here I begin my explanation of how you can convert and deliver your knowledge worldwide. I can deliver my small business accounting software through just about every modal via the internet and guess what the traffic just follows.

You should always start with a plan of what you are going to say and share with your audience and therefore you need a structured approach which is best done by creating a storyboard. As opposed to using pen and paper I generally like to use software slide making tools like Microsoft powerpoint or Apple Keynote as they are really easy to put interesting content into and you can use the output in your video. As you will see in a moment you can create your storyboard and produce your video without having to spend any money what so ever on even the lowest cost (apart from free of course) and best tools that money (if you had it) can buy to get your video out there making money.

To produce the video in YouTube or Podcast or downloadable format you need to head over to TechSmith on the web and look for Camtasia Studio and before you download the thirty day trial watch ALL of the tutorials. You have thirty days free use of the Camtasia Studio software once you download the trial and what you don’t want to do is have it lying idle on your machine whilst you finish your storyboard and cut into the time you have to produce and refine your video.

I will be sending another article to this blog in the next day or so (owner permitting) where I walk through in detail (and at no cost) how to create a detailed storyboard using some of my small business accounting software videos as real live examples, but first you must go and study the tools I have discussed here.

Internet and Business Online accounting software for small business, business accounting software, small business accounting software

Most good business managers can tell you how much of their time is devoted to dealing with problems in the business. Problems have a habit of leaping out at you when you least expect them. Spotting a problem you need to solve means you knew what to watch out for in the first place. Good business managers are by their very nature good at solving problems.

All businesses should have managers who know the importance of and can implement financial controls. Financial controls wave the red flags and alert management to financial problems. Financial controls go hand in hand with the reports produced by small business accounting software. It is critical that you can create reports using small business accounting software that let you examine the differences between planned and actuals in focus areas such as cash flow, expenses and revenue. Begin by identifying a minimal group of numbers and relationships that you need to monitor and then design your accounting or financial reports to present these critical factors in the right format.

Monitoring the margins you expect from revenues is critical and any deviations should receive immediate scrutiny followed by swift action to resolve the issue. If you sell products in volume any sudden change in margins can multiply into losses very quickly and therefore it follows that any decreases in volumes should be immediate cause for concern and therefore having up to date information available is critical. Don’t ever let fixed costs deviate from the plan especially in the first quarter of the year. Good small business accounting software should let you easily create debtors reports (people who owe you money) and the results in these reports should be monitored closely.

Experience is the way to learn and over time you will learn which financial controls should be highlighted in your accounting reports, just make sure you have the right small business accounting software that can generate these.

Internet and Business Online accounting software for small business, business accounting software, small business accounting software