<![CDATA[dawnbridgeconsulting.com - Education]]>Mon, 23 Sep 2019 19:30:11 -0400Weebly<![CDATA[What’s the ONE Vital Key to Managing Your Business?]]>Mon, 22 Oct 2018 15:11:52 GMThttp://dawnbridgeconsulting.com/education/whats-the-one-vital-key-to-managing-your-businessPicture
Understanding Gross Profit!

We accountants have all these terms:  Gross Sales, Gross Profit, Net Income.  What the heck? Why can’t we just keep it simple?  You just want to know how much money you’re making, how much you have to invest in your business and how much you have to take home, right?  Well let’s make it simple!

Gross Sales = How much money you are making.
Gross Profit = How much money you have to invest in your business.
Net Income = How much you have to take home. (We will get to this in the next blog)

Today we are going to talk about Gross Profit & Cost of Goods Sold. 

So what’s the deal with GP & COGS and why should you care?  Excellent question! There are two ways expenses are classified on a P&L, one as COGS and one as plain ol’ operating expenses.

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There is a difference and it’s an important one.  Every account within your COGS category should be associated directly with what you are in business to perform.  For example, if you build houses then COGS should include your hired labor, your materials, permit fees, dumpster fees, etc.  

An excellent question to ask yourself is, “Would I have this cost if I didn’t build a single house?”  If the answer is no, then very likely it should be included in your COGS category of your P&L.

When you apply the formula: Sales - COGS = Gross Profit you have a beautiful number that gives you insight into your business.  GP basically tells you you have x amount left over for further investments into the business after paying all the costs associated with building houses, to use our example.  When you’ve properly determined this amount, you can boldly make decisions regarding overhead, advertising, office personnel, rent & interest, to name a few. 

It goes without saying that by analyzing COGS and keeping material & labor cost to a minimum you will make more informed decisions and move your business forward!

Ready to do this in your business, then schedule a free consult!  I can't wait to meet you!

Schedule a Free Consult!
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<![CDATA[What does tofurkey have to do with sales?]]>Mon, 15 Oct 2018 20:48:02 GMThttp://dawnbridgeconsulting.com/education/what-does-tofurkey-have-to-do-with-sales Picture
As Thanksgiving quickly approaches, I’m already thinking about the menu, the guests & the decor.  It’s a beautiful time of year. Nothing makes me happier than to have the people I love all together.   All the food is placed on the island, the heart of the kitchen, and everyone digs in.  In my family, it’s usually a free-for-all after grace.  As a host, I make sure that the path of plenty makes sense. What’s does that mean? Well… I want the turkey to be before the stuffing and the mashed potatoes to be before the gravy.  See where I’m going with this? I want flow...ease…delight!

The Profit & Loss statement reflects this need for flow.  The P&L is the go-to for most business owners. Ultimately, it works everyday to show us exactly where our business is making money or losing it.  In order for the statement to work correctly we have to place items appropriately.

Today we are talking about the first item of the proper flow:
Sales & Income

Still confused about the tofurkey?  Let me explain...


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Sales is the amount generated from selling your product or service.  Pretty simple stuff. Yet, let’s elaborate. From a strictly accounting perspective - one account titled “Sales” where everything gets dumped is fine.  But from a managerial perspective, it leaves a bit to be desired. Imagine you have a roast, a turkey and a tofurkey at Thanksgiving.  If after the meal, you take an overall account of how much was eaten, you wouldn’t have the necessary tools to make good decisions for NEXT Thanksgiving.  

Therefore, it’s imperative to further detail your sales.  If you sell multiple items break those babies down. I mean don’t go crazy and have a hundred items listed, class them if necessary - but have the categories detailed enough to truly tell your financial story.  

To further assist in decision making, I recommend creating a P&L that has percentage of sales beside the account totals.  This simple technique will show you exactly where your marketing and sales efforts are paying off.

Take a look.  Which gives you more information in my silly example?  It turns out, there’s no need for that tofurkey next year! :) 

Many software systems such as Quickbooks® allow you to “map” your items to specific sales accounts.  If you need expert advice and facilitation to get the most out of your reports, simply contact me at 336.262.5464 for an initial consult.

Happy Fall y’all!  

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<![CDATA[EQuity:  Let's make hay]]>Fri, 05 Oct 2018 22:51:26 GMThttp://dawnbridgeconsulting.com/education/equity-lets-make-hayPicture
Have you heard the old adage, "Make hay while the sun shines?"  In simplest terms, the equity section of a balance sheet tells us exactly how much hay is in the barn.

This section of the balance sheet is usually the most confusing.  Understanding it asks us to be a bit abstract.  

Assets are straight forward.  Liabilities are too.  We know what we own, and we know what we owe.


Equity on the other hand is what our business is worth in accounting terms.  (The equity section does not account for Goodwill that has been established.)  To determine the true value of your business you would need to speak with a valuation expert. 

In the simplest terms, equity accumulates the profit/loss throughout the life of the business, initial investments or injections and amounts withdrawn from the business.  The exact way these are handled will depend on the type of entity.

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Let's use an S Corp for example:

Equity will be comprised of the $10,000 you initially deposited, along with assets transferred into the business name.  These first injections, along with others, are usually allocated between Common Stock & additional paid in capital.  A CPA will help you with this determination, so don't worry about that.  You will get expert advice in getting the allocations correct.  It's only important to know WHAT these terms mean.  

During the business' lifetime, it will generate either a profit or a loss, annually.  The P&L will calculate this for us.  Because the P&L is a partier and closes out at the end of the calendar/fiscal year - the net amount gets transferred over to the equity section into Retained Earnings to accumulate year after year and the P&L gets a fresh start at $0.

Because S corp owners are allowed to take distributions/draws, any amounts withdrawn will be deducted as a return of equity. 

​It will look like this:

I think it's a beautiful day for making hay!
Maybe your barn isn't as full as you like?  Let's figure out why!

Please contact me at 336.262.5464 to schedule a consult. 

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<![CDATA[liabilities:  Paying the piper]]>Thu, 27 Sep 2018 13:42:40 GMThttp://dawnbridgeconsulting.com/education/liabilities-paying-the-piperPicture
The piper has come to town and he sits squaring in the liability section of your balance sheet.  He waits for payments and the day he can leave town.
 
Liabilities are the amounts owed.  This can encompass your light bill to a partner buyout.  
 
Ultimately, the less liabilities, the better, but liabilities aren’t all bad.  They make sense when lower interest rates are available.  In this scenario, financing frees up cash during asset acquisitions. 
 
Ultimately, it’s all about keeping the piper under control, because he can sneer and make us lose sleep at night if left unattended. 
 
Assets are arranged by liquidity as we talked about in the prior post.  Liabilities, on the other hand, are listed based on payback period.  Liabilities are merely balances.  They do not describe the type of expense.  The balance in a liability account is akin to the payoff balance on your car not the car itself.

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Below is an ordered listing:

Current Liabilities - expect to pay these within 30 days or so.
  • Accounts payable is the account that holds the balance of your monthly bills, i.e., your vendor bills, phone & advertising bills.  (The actual expense is on the P&L.)
  • Credit cards balances
  • Payroll and other short-term liabilities
 
Long Term Liabilities - loans with a longer payback period listed shortest to longest.
  • Car loans
  • Fixed asset loans
  • General business loans
  • Partner buyouts
 
These categories are subtotaled and added together.  The final amount will ultimately be added to equity. 

Need help wrangling the piper?  Call me!  336.262.5464 

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<![CDATA[Nice assets.]]>Fri, 14 Sep 2018 17:42:32 GMThttp://dawnbridgeconsulting.com/education/nice-assets Picture
Acquiring.  Consuming.  Owning.

In today's society, these are our favorite words.  Discussions around many boardroom tables and wine bars center around prepping a budget to include the next asset acquisition.

How do we account for such valuable stuff?
 
Actually, it’s pretty easy.  For most of us, we can get our head around tangible items we can see and touch.

​Let's get started!
 
Assets start the party and come first on the balance sheet.  Examples of assets include, cash, accounts receivable (although we haven't received the funds, they are DUE to us,) investments, fixed assets, intangible assets and other assets. 
 
Assets are listed in order of liquidity.  Cash is listed at the top because, duh, it is the king of liquidity.  Yet land, for example, although extremely valuable, comes much later.  

We place items on the balance sheet when the life of the asset is longer than one year.  Pencils will obviously go to office supplies as an expense, but the computer you are reading this on will last substantially longer – therefore, we would categorize it as a fixed asset.
 
The major categories and types of items are:
If you are concerned your assets might be misplaced! (Ahh!  There's nothing worse!) 
Give me a ring at 336-262-5464 for a consult.  
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<![CDATA[7 Things Every Savvy Business Owner Should Know About financial statements!]]>Mon, 10 Sep 2018 18:35:08 GMThttp://dawnbridgeconsulting.com/education/7-things-every-savvy-business-owner-should-know-about-financial-statementsPicture
How about I offer you a down and dirty – straight to the point – boiled down version of the seven things you need to know about financials to be the savvy business owner you aspire to be?

Because, let's be honest, 
most of us aren’t going to raise our hand and volunteer to sit through Accounting 101!
 
This marks the beginning of a seven-week blog series covering the six major categories found within financial statements.  Each week we will go in-depth to clearly identify what you need to know quickly, easily and efficiently to produce the best reports possible.
 
By understanding the in’s and out’s of each category, you can totally up your accounting game!  And doesn't everyone want to do that?? 
 
After the series you will:
  • properly classify your Balance Sheet & Profit & Loss accounts! (I've seen this wrong. A. LOT.)
  • be more confident analyzing your financials! 
  • more quickly identify problem areas!
  • rely on good information to make vital management decisions!
 
Week 1:  Short Introduction to the Dynamics of the Balance Sheet (BS) & Profit & Loss (P&L)

Balance Sheet Categories
Week 2: Assets
Week 3: Liabilities
Week 4: Owner’s Equity
 
Profit & Loss Categories
Week 5: Sales
Week 6: Cost of Goods Sold
Week 7: Expenses
 
Let’s get started on our Week 1 Introduction! 

As you peruse financials, you will notice that the Balance Sheet comes first, followed by the P&L.  In our ordered accounting world this is the natural progression.  The Balance Sheet is at the beginning because it is the living, breathing heartbeat of your business.  It was born on the day of inception and it will continue on, adding and subtracting, until your business ceases to exist. The BS is the proverbial road that goes on forever.  The P&L, on the other hand, calculates annual income, provides valuable insights about running our business and then “closes out” at the end of every year.
 
Q:  What is the purpose of a Balance Sheet?
 
A: The BS’s purpose is to calculate the equity of your business. 
 
Basically, the BS holds your stuff.  It holds the things of value, debts that are owed and ultimately, the worth built up within your business.  We will discuss each of these in detail in the coming weeks.
 
The simplified BS equation is: 
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Q:  What is the purpose of the P&L?
 
A:  The purpose of the P&L is to calculate annual income.
 
The P&L is a partier!  If your business is on a calendar year, your P&L has a big New Year’s Eve party – out with the old, in with the new!
 
The P&L knows a thing or two about letting go.  It does it every year.  It knows its purpose.  So as the ball drops – all the income/loss from the prior year gets transferred over to the BS.  (We will talk about this move during our Owner's Equity discussion.)
 
On January 1, the P&L is born anew and starts all over at zero!  It’s a fresh start.  We get to make more money and better decisions.  As savvy entrepreneurs we strive to always do it better than before!  
 
The simplified P&L equation is: 
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The P&L starts by calculating Gross Profit.  GP is comprised of sales less cost of goods.  Gross profit is a valuable number to know and understand if you are in the business of selling items or services that have a cost attached directly to them (i.e. inventory, direct labor.)  This one item could be the VITAL key in increasing your net income by several percentages.  Largely, I have found it is often overlooked because its importance isn't completely understood.  But don't worry, we will cover the why's and how's of Gross Profit throughout the series!
 
Once Gross Profit is properly established, you are able to discern what funds are available for operating expenses, such as, advertising, rent, salaries, etc. After deducting operating expenses, we are left with our coveted Net Income or Loss.  If you are wondering, “What expense should I categorize as cost of goods and what’s an operating expense?”  I've got you covered!  We will dive deep into those exact questions in the upcoming blogs! 
 
As a quick review, this image is an illustration of the flow of financial statements! 
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<![CDATA[new perspective.  new result.]]>Thu, 17 May 2018 13:21:58 GMThttp://dawnbridgeconsulting.com/education/new-perspective-new-result
If you change the way you look at things,
the things you look at change.
--Wayne Dyer
Do you feel like you are tackling the same problems every day?

Do you wonder if there is a better way?  

Have you looked at the challenge from every angle?

Could you use a new perspective?


These are a few questions to ask yourself as you run your business.  It's easy for us, as entrepreneurs, to get lodged in linear thinking. 

​Linear thinking is:
"a process of thought following known cycles or step-by-step progression where a response to a step must be elicited before another step is taken."
- Chuck Lamp, Do We Think Differently?  Linear vs. Non-Linear Thinking, Chuck's Lamp
In contrast, non-linear thinking is:
Human thought characterized by expansion in multiple directions, rather than in one direction, and based on the concept that there are multiple starting points from which one can apply logic to a problem." 
​- Chuck Lamp, Do We Think Differently?  Linear vs. Non-Linear Thinking, Chuck's Lamp
Sometimes we all get stuck in linear - one step after the other - this is the way it's always been done - thinking.  A fresh perspective will challenge ideas and beliefs that may be holding you back!

Through thorough analysis of your questionnaire, we will identify your own strengths and weaknesses as a leader and then look at obstacles from every possible angle. 

These problems may be:
  • Low employee moral
  • Vanishing bottom line
  • Dissatisfaction with the day to day operations
  • Strained vendor relationships
  • Executives with different opinions leading to decision paralysis
  • Inefficient and outdated work flows

​When you apply a different filter and an outside perspective to your day to day obstacles, amazing results are possible!

Talking through your challenges with me - an experienced, unbiased third party, business strategist - will stimulate free flowing ideas. 

You know your business better than anyone!  You are the expert, yet sometimes we need an outsider to spark new ideas and clarity.  I am here to partner with you as you take the next step in your business!
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<![CDATA[Why having a business vision will change your life!]]>Thu, 17 May 2018 13:14:21 GMThttp://dawnbridgeconsulting.com/education/looking-into-the-future
If you can see your path laid out in front of you step by step, you know it's not your path. 
Your own path you make with every step you take. 
​That's why it's your path.
-Joseph Campbell
I know what you're thinking.  "I'm busy simply trying to RUN my business and extinguish fires every. dang. day!  I don't have time for this!"  You feel there is no time to sit, dream about the future and write pretty words.  You have to bring the future to you.  I get it!  It's totally human to want to "fix it!"  Especially for us Type A's.  

But... what if you started to build a house without any plans? 

​What if you ran to your local home improvement store and started pricing and buying?  What if you ran by the paint store on your way to pick up the kids at basketball practice and chose a color for your main living area?  Just pick one.  There's no time to consider lighting and how it corresponds to your other rooms!  (I might have done this!)  You see...I didn't want to take time to evaluate the total picture.  I needed the room painted.  People were waiting on me to pick a color - so this color (YIKES!) would have to do.  What inevitably happens in this situation is, unless I get very lucky, I end up disappointed with the results.  I didn't stop to contemplate the vision I sought.  Now imagine doing this for an entire house?  Obtaining a final result you are proud of in this rush-to-action mindset is almost impossible.  
We are building here.  You are building not only your business but your life.  You will spend more waking hours attending to the business of business than you will most anything else.  How can that not be important enough to stop, reflect and envision your future?
Why will creating a vision for your company change your life?
  1. Your vision will put your stamp on the world.  You will make it your own.  You will look back after a few years of hard work and see yourself and the impact you have made in the world.  Imagine the pride?
  2. Having a vision will allow you to seize opportunities because you have clarity around your results!  Imagine how amazing you will feel to as you grab success with your two hands?  Because now... you know exactly what you want!
  3. Vision abolishes paralysis!  You will decide more quickly.  You will have a litmus test to gauge situations.  Because you are aware of your company's needs, you will innately know what's best.  Imagine the empowerment?

Do you dare dream bigger?  YES, YOU CAN! 

We are all unique in our service to the world.  We all have gifts! 

​Taking time to create a vision will lead you into YOUR future and will, indeed, change your life! 

Who's with me?
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<![CDATA[Sweetening your business...]]>Wed, 09 May 2018 19:54:40 GMThttp://dawnbridgeconsulting.com/education/sweetening-your-business
Who of us has baked a cake - followed all the directions - only to pull the cake out of the oven and see a huge crack down the middle?  Our first instinct is to cover it up... 

We start to construct the layers and do one of two things:
1.   Flip the layer over so the crack doesn't show or
2.  Apply enough icing that no one ever knows. 

Plenty of icing means yummy goodness all around!  No one is the wiser!  Yay us!  We are going to eat it anyway, right?  What's the harm?  

This cover up method works great when I'm not at my baking best, but what happens in a business when we simply hide our flaws or cover them with tasty sugar?

Your business is like a cake.  You add all the right ingredients - wisdom, know-how, and hard work!  You market correctly and that baby bakes.  You watch it rise and turn golden brown.  You handle your customers very carefully, with great care and integrity and layers start to add up!  Then the goodness appears - icing, aka, sales!  You feel the sweet relief of your business growing! 

One day, although you've baked a thousand cakes, you start to notice issues here and there.  You realize that the cake is starting to separate.  You are having to hide more - apply more icing. 
What are these cracks?  They could be:
  • reduced sales
  • shrinking net profit
  • unhappy employees
  • increased costs of raw materials, labor or money  
  • friction within management
  • customers who aren't holding up their end of the bargain
  • loss of vision
  • loss of passion
You see the cracks.  You know they are there, but you have either - flipped the layer over so you don't have to look at it or high sales has iced it over. 

If your sales are high, the sweetness has hidden lots of flaws.  And if you are very honest with yourself, you will realize you have stopped doing the things you did at the beginning.  It turns out that your success may be a double edged sword.  Maybe, you stopped researching insurance premiums?  You ignored the finance charges that are creeping up.  You've slipped and not stayed in touch with your marketing agency to review monthly ROI on your advertising spend. 

But you're thinking, "There's plenty of cash in the bank, so why bother?"

I'm here to tell you - bother!  What if the sales drop?  All those extra expenses will gobble up your bottom line.  What if you have ignored the signs of inner company turmoil, and efficiency and job satisfaction have slipped right before your very eyes?

Take action!  Make a list today of all the cracks in your cake.  Analyze every line on your income statement, review loans and interest rates, read blogs in your industry about new and cheaper ways to conduct business or take the pulse of office moral.  The worst thing that can happen is all that gooey goodness goes right into your pocket!

This is also a perfect time to contact someone with heart and expertise to get you back on track!  I would love to help!  Learn more about me and shoot me an email for a quick free chat to see how, together, we can bake a brighter future!
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