- Cash Projections Worksheet - This is a projection statement and is used as a planning tool to help predict the outcome or viability of future business needs and financial goals; it is your "action plan" for both your short and long-term ambitions, and every business should have one. Considering your "beginning cash", or the anticipated amount left over from the previous period (week or month) and added to your current sales, provides you with your total sales (cash inflows) for the period. Subtracting your cash outflows (expenses) from total sales, gives you either a cash surplus or a cash deficiency, and indicates to you if cash is required to meet your needs and goals for that period. Having this worksheet in place is the only way we can tell if we should be controlling our spending, or if there is room for spending. It is very useful to compare your projected figures to actual outcomes, as this will provide you with an even greater level of accuracy in predicting future business possibilities. Ducoff: Cash Flow Projections are the "businesses budget". This is looking through the car window shield, or even better, at your satellite navigational system — "I want to get from here, to there".
- Cash Flow Statement - This spreadsheet will show you how much money is needed to operate your business, and when it is needed. As with the Cash Projections Worksheet, it is only concerned with the amount of actual cash coming into the business (revenue or cash inflows) and the actual amount leaving the business (expenses or cash outflows), in a given time frame. Subtracting your expenses from revenue gives you your Gross Profit Margin (or Cash Excess). Once you have deducted your Operating Costs from the GPM, you will arrive at an Ending Cash Balance (either positive or negative) for the period, which will reveal to you if and when you need to tighten up operations. Ducoff - Statement of Cash Flows represents "fuel for the business" and must be constantly monitored on your gas gauge. Did the period you are looking at add or deplete cash for the period, and how much cash do you have right now?
- Income Statement or Profit & Loss — This statement tracks revenue and expenses in order to analyse your profitability. The components that make up the P&L are: Revenue (Sales); COGS (Cost of Goods Sold) and Gross Profit (Revenue minus COGS = GP); and below the Gross Profit line are your Operating Expenses; and when subtracted from the GP give you a Net Income (before and/or after taxes). This statement acts as your financial report card at the end of each month to tell you if sales have improved; if you have controlled expenses (if the percentage of expenses to revenue has gone up or down, and where); and therefore if your profit margin has increased or decreased. It will be helpful to note that if you are at anything less than 50% Gross Profit, you may have trouble covering your Operating Costs and making a profit. Operating Costs traditionally run at 40-45% of revenue in the spa industry, leaving us little room to move if our COGS are too high. COGS include our service staff payroll and product costs for both retail and professional. Ducoff: The Profit & Loss statement is your "measurement of business performance", measured by the speedometer, tachometer, and odometer. Are you going 90 but still in second gear? Lot's of sales but no profit?
- Balance Sheet — This reports the business's Assets, Liabilities and Shareholder's/Owner's equity at a specific date. It explains what the company's investments, obligations, and resources are to help predict the amounts, timings, and certainty or uncertainty of future cash flows. Total Assets must always equal the Total Liabilities + Total Owner's Equity number, hence the term "Balance" sheet. Ducoff: The Balance Sheet is the "health of your business", represented on the instrument panel by the temperature and oil pressure gauges. People are adding assets, but they may be financing those assets. People get into terrible messes by accumulating debt as opposed to cash. Ask yourself, "Do I want to add value or increase debt?"
By Leslie Lyon, Spas2b, Inc. www.spas2b.com