ACCOUNTING FOR
THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Professor Dawn Fotopulos
Founder, Best Small Biz Help.com
ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
What's a
"numberphobe"?
Terrified of numbers!
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Yo u R e a d N u m b e r s E v e r y D a y
– Weight scales
– Thermometer
– Bank account balance
• You know how to read numbers
• Small business owners never look at their numbers
• Accountants will do not read them for you
Does your mechanic drive your car?
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Do you drive your
car with your eyes closed?
No!
Then don't run your Small Business without
knowing how to read your financial dashboard.
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
What If…
• You could work half as hard and make twice the money?
• What if you could run your small business free of debt or
meddling outside investors?
• What if you could finally get a return for all your sacrifices
and sleepless nights?
You can.
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Who Has Benefitted?
– Jewelry Designer who avoided bankruptcy
• Reduced expenses, cut products, increased gross profit
– Photographer who showed her largest profit ever
• Changed target audience, prices, marketing strategy
– Interior Designer who tripled earnings
• Changed prices, focused services, improved collections
Dreamers who launch small businesses
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
D i d Yo u K n o w …
• Less than 2% know that a Net Income Statement is the same
as P&L?
• Less than 1% know they run their business on gross margin,
not revenues?
• Not a problem; an epidemic.
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
The 3 big questions…
– Are you making a profit?
– Is there enough cash to run the
business?
– Is the business building wealth
or destroying it?
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Yo u r f i n a n c i a l d a s h b o a r d
Three Key Gauges: Chapter 1
– Net Income Statement
– Cash Flow Statement
– Balance Sheet
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Net Income Statement:
Chapters 2 & 3
Making a profit or showing a loss
–
–
–
–
Money in; Money Out
Money In; Net Revenues from sales
Money Out; Expenses to run the business
Ratios help keep the business in balance
• Net Income Ratio
• Grocery store example
What’s your industry norm?
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Gross Margin
Ratio must be 30%
or higher to stay in business
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ACCOUNTING FOR THE NUMBERPHOPIC
A Survival Guide for Small Business Owners
Your Business Could
Be Showing A Profit…
While Going Bankrupt
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
C a s h F l o w S t a t e m e n t : Chapter 5
• Checkbook- starting cash, cash in, cash out, ending cash
• Gas in your tank– how far you can travel
– how long you can run the business w/o needing more cash
• Gas gauge doesn't tell you to buy gas
You must interpret where the needle is
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Why Revenues
And Cash Aren’t the Same
• Delays in payment
• Discounts to payment
• Bankruptcies
• Book Net Revenues when they happen for
accurate sales cycle reporting
• Book cash in when it arrives- accurate cash
cycle reporting
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
It’s Easy to Improve
C a s h F l o w : C hapter 6
• Invoicing policies
• Collections policies
• Relationship building with clients
• All affect cash flow- keep it healthy
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
W h a t ’s t h e Va l u e
of the Business?
• Just the salvage value of the
desks, computers?
• Do businesses have terminal
value?
• Can they be sold for more than
annual revenues?
Yes!
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
How to Win Friends and
I n f l u e n c e B a n k e r s ! Chapter 8
• Balance Sheet- Net worth statement of
the business
• Personal net worth- business net worth
• Relationship between what you own;
what you owe
• Same for the business; relationship
between assets (own) and liabilities
(owe)
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Net Worth= Owner ’s Equity
Chapter 9
• Positive Net Worth or Net Worth
that increases over time
• Negative Net Worth or Net Worth
that degrades over time
• Something must change to avoid
bankruptcy
• How?
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Our Mission to Save
Struggling Small Businesses
– Not just read, interpret, make course corrections
– Anticipate what will happen
– You're running the business
The business isn't running you!
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Interview with
Norm Brodsky
Chapter 10
“A business is all about the numbers.
Most businesses could make it if the
owners knew even the very basics
of reading their financial dashboard.”
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Comments on NUMBERPHOBIC:
– So much fun to read!
– Fascinating.
– I'm tired of being a starving artist..
– It should be required reading before anyone goes into
business. It's so empowering.
– Women entrepreneurs especially need to read this book.
They're afraid of debt but if they knew how to manage it,
their businesses would be much more successful.
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Remember:
– The financial dashboard is your GPS
– Net Income- showing profit, break even, loss
– Cash Flow- enough to run the business/ how long
– Net Worth-building or destroying wealth
Understand your dashboard; reduce risk
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Available:
Amazon.com
Barnesandnoble.com
Indiebooks.com
Twitter: @dfotopulos @bestbizhelp
www.bestsmallbizhelp.com
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ACCOUNTING FOR THE NUMBERPHOBIC
A Survival Guide for Small Business Owners
Join Dawn’s Mission
• Twitter: #knowyournumbers
• Live Stream: Tues. Oct 7th 7PM EST The King’s College, NYC
•
https://new.livestream.com/TheKingsCollege/AccountingfortheNumberphobic
• Test Yourself: http://www.bestsmallbizhelp.com/know-yournumbers/
• Ask questions
Thank you!
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