Financial Fluency

The world of finance has its own  language. As business owners we need to understand these words, and I mean really understand them so that we can best manage  legally compliant, powerful and  profitable businesses. Here are  some of the core financial words.

Revenue
The income generated from sale of goods or services, or any other use of capital or assets, associated  with the main operations of an  organisation before any costs or expenses are deducted.

Expenses
Money spent or cost incurred in an organisation’s efforts to generate revenue, representing the cost of doing business.

Income
The flow of cash or cash  equivalents received from work (wage or salary), capital (interest or profit), or land (rent). Gross income The amount by which sales revenue  exceeds production costs (cost of sales)

P&L (Profit & Loss Statement)
One of the three primary financial  statements used to assess a  company’s performance and  financial position (the two others being the balance sheet and the cash flow statement)

Chart of Accounts
A listing of the accounts available in the accounting system in which to record entries.
 
Balance Sheet
A condensed statement that shows the financial position of an entity on a specified date, usually the last day of an accounting period.

Budget
An estimate of costs, revenues, and resources over a specified  period, reflecting a reading of  future financial conditions and goals. One of the most important administrative tools.

Net Income
The total revenue in an accounting period minus all expenses during the same period.

Trading Whilst Insolvent
Not being able to pay debts as and when they fall due.

Creditors
A person or company to whom money is owing.

Debtors
A person or entity that owes  money.

Profit
A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.

GST
A broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.

BAS (Business Activity Statement)
A tax reporting requirement for businesses issued by us on either a monthly or quarterly basis.

Overhead Costs
All costs on the income statement except for direct labour, direct  materials, and direct expenses.

Whilst I can’t provide financial  advice I can urge you to befriend a patient accountant who specialises  in small business. Ask questions  until you understand, for me it took years. Work together to set up systems to get your expenses loaded into a software system such as MYOB or Xero. Meet once per month to discuss your P&L – critical for  financial learning. Profit and  success are so much more than what is sitting in your bank account.

What’s your financial fluency self-rating out of 5?

What more can you be doing? How profitable is you private practice?

Contact Cathy today to find out how a private practice coach can help you with all of this.

This article featured in the July Edition of Paeds Biz