Your Numbers Made Easy

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1 2016 APDT Annual Educational Conference and Trade Show Your Numbers Made Easy Susan Briggs

2 Learning Outcomes 1. Know the key risk areas in your financial system to prevent theft and costly mistakes in your business 2. Learn how to request meaningful reports from your accountant 3. Understand how to determine which programs you offer are most profitable

3 Our Outline Build a Strong Foundation Risk Management Meaningful Financial Reports Profitability by Service

4 Getting to Know You

5 Your Role Today

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7 Build a Strong Foundation Your Owner Duties Know Your Numbers Review Regularly Take Action

8 Build a Strong Foundation Build a Team Bookkeeper Tax Accountant Accountant/CPA

9 Build a Strong Foundation Business Accounts Legal Entity Checking Account Credit Card Accounting Entity Business Personal

10 Build a Strong Foundation Chart of Accounts Right Level of Detail How make money? How spend money? How much money in bank? How much do we owe? What is my equity?

11 Your Chart of Accounts - Revenue Sales Group Classes Puppy Basic Manners Agility for Fun Day School Private Sessions Retail Sales

12 Your Chart of Accounts - Expenses Advertising & Marketing Ads Logo Products Payroll Daycare Training Training Supplies Treats Collars/Leashes Telephone Auto Mileage Continuing Education Library Seminars Online Programs Travel Meals

13 Your Chart of Accounts - Assets Cash Checking Savings Petty Cash Accounts Receivable (A/R) Retail Inventory Furniture, Fixtures & Equipment (FF&E) Hardware Software Furniture

14 Your Chart of Accounts - Liabilities Accounts Payable Credit Card Payable Payroll Tax Liability Notes Payable

15 Your Chart of Accounts - Equity Differs Based on Legal Entity Sole Proprietor Owner Equity Net Income/Current Earnings Partnership & LLC Partner 1 Investment Partner 1 Draw Net Income/Current Earnings Corporation Stock Net Income/Current Earnings Retained Earnings

16 Action Plan Build Your Foundation Spend Time on Owner Financial Duties Build a Team Separate Personal & Business Revise Your Chart of Accounts

17 Strong Foundation Questions?

18 Comic Break

19 Risk Management Prevent Theft & Loss Get Paid for all Services Provided Pay Taxes Timely Set Rates to Profit

20 Risk Management Prevent Theft Cash Supplies Equipment

21 Prevent Theft of Cash Cash Security Reconcile Daily Cash Bank Statements Credit Card Statements Separate Duties

22 Prevent Theft-Supplies & Equipment Track Usage Inventory Assign Accountability Employee Handbook Policy Daily Logs

23 Risk Management Getting Paid Invoice for all Services Collect all Invoices Manage Your Service Inventory

24 Invoice & Collect for all Services Count Noses Reconcile to Invoices or POS system Invoice Timely Payment Policies Payment Timing Customer Friendly Forms of Payment

25 Manage Your Service Inventory Minimize Cancellation & No Show Losses Deposits Pre-payments Maximize Revenue Class Schedule Timing Private Session Availability Social Media Flash Sales to fill Spaces

26 Risk Management Pay Taxes Timely Payroll Sales Owner Earnings

27 Payroll Taxes Federal Taxes Employee Income Tax Employee Social Security Employee Medicare Employer Social Security Employer Medicare Unemployment Taxes State Federal

28 Sales & Use Taxes State Specific Products Services Items Purchased to Use in Business Remit Timely

29 Owner Pay Taxes Type of Business Entity Determines How Paid Draws Sole Proprietor, Partner, LLC Salary Corporation Draws Require Estimated Tax Payments Due Quarterly Minimum Amount of Tax Paid Prior Year

30 Risk Management Setting Class and Service Rates Pricing Models Competitor Cost Plus Profit Value

31 Risk Management Determining Hourly Rates How much do you want or need to earn annually? How many billable hours will you work? Rate Needs to Include: Vacation & Other Time Off Marketing & Admin Time Phone Consult Time Travel Time

32 Example Hourly Rate Calculation Hourly Rate Annual Net Pay $75,000 25% Tax Rate $93,750 Annual Hours 2,080 Billing Rate $45 Billable Hours 2,080 Vacation 2 weeks -80 Holidays 8 days -64 Marketing/Admin 8 hrs/wk -400 Phone Inquiry Time 4 hrs/wk -200 Travel Time 1 hr/day -250 Billable Annual Hours 1,166 Billing Rate $80

33 Action Plan Manage Your Risk Review Controls to Prevent Theft & Loss Ensure all Services Provided are Paid Minimize Expiration of Service Inventory Pay Taxes Timely Set Rates to Profit & Enjoy Time-Off

34 Managing Risk Questions?

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36 Comic Break

37 Meaningful Financial Reports Quality Information Your Financial Report Set Profit & Loss Balance Sheet Cash Flow Statement Key Performance Indicators (KPI)

38 Quality Information Information versus Data Accurate Timely Weekly Input: Sales & Expenses Monthly Reconcile Statements Financial Reports Ready: 10 th -15 th of next month Use Your Team

39 Financial Reports Profit & Loss Financial Operations Summary Period of Time Does not Equal Cash Available

40 Financial Report Set Balance Sheet Summarizes What You Own, Owe & Equity Snapshot in Time

41 Financial Report Set Cash Flow Statement Summarizes Flow of Money Period of Time Reports Cash Balance Changes

42 Profit & Loss Report Revenue Cost of Goods Sold Gross Profit Operating Expenses Net Operating Income/(Loss) Other Income & Expense Taxes Interest Depreciation/Amortization Net Income/(Loss)

43 Sample Profit & Loss Report

44 Meaningful Profit & Loss Report

45 Balance Sheet Assets Current Assets Fixed Assets & Accumulated Depreciation Liabilities Current Long-term Equity Owner Activity Earnings

46 Sample Balance Sheet

47 Meaningful Balance Sheet Validates Data Accuracy Cash Reconciled to Bank Statement Liability Balances Equal Statement Amounts Must Balance Earnings in Equity matches Profit & Loss Statement

48 Cash Flow Statement Beginning Cash Balance Plus Profit for Period or Less Loss for Period Operating Adjustments Investing Cash Activity Financing Cash Activity Ending Cash Balance

49 Sample Cash Flow Statement

50 Meaningful Cash Flow Forecast Bank Balance Add: Deposits in Transit Estimated Sales Receipts A/R Collections Deduct: Outstanding Checks Payroll Vendor Payments Due Cash Available/Shortage

51 Key Performance Indicators: KPI Supplement to Financial Reports Aids in Business Decision Making Business Metrics

52 Training KPI Units Dogs per Class Day School Attendance Private Sessions Provided Percentages Class Occupancy Graduation Rates Enroll Next Level/Program Private Session Bookings Conversion Rate: Calls to Bookings

53 Consider Your Business Stage Growth Occupancy Conversion Rates Volume Trends Improve Profits Revenue per Dog Enroll Next Program

54 Sample KPI Report

55 Action Plan Financial Reports Confirm Timely Processing of Accounting Information Define Your Report Set & Due Date Outline KPI to Monitor Schedule Time for Monthly Financial Review

56 Financial Report & KPI Questions?

57 Comic Break

58 Profitability by Service Profit Contributed by Each Revenue Stream Revenue Volumes Identify Fixed Costs and Allocate Revenue Space Assign Variable Cost to Each Revenue Stream

59 Data Required P&L Statements for Prior Year Fixed Costs Variable Costs Number of Dogs Trained Advertised Rates

60 Step 1: Revenue per Dog Company Total Total Revenue $774,025 Total # of Dog Training Performed 6,885 Effective Rate per Dog $ Published Rate Effective Discount % Group Classes Private Sessions Dog Daycare $350,000 $205,250 $95,800 1,850 1,175 3,825 $ $ $25.05 $225 $180 $30 16% 3% 17%

61 Step 2: Fixed Costs Fixed Costs Company Total Property Costs $111,800 Utilities 84,400 Management & Support Staff 80,600 Advertising & Marketing 75,000 General Supplies 6,580 Other 29,775 Total Fixed Costs 388,205 Total # Dogs Trained 6,885 Fixed Cost per Dog $56.38 Group Classes Private Sessions Dog Daycare $42,503 $26,844 $42,503 32,072 20,256 32,072 30,628 19,344 30,628 36,000 3,000 36,000 3, ,153 14,292 1,191 14, ,518 93, ,518 1,850 1,175 3,825 $79.74 $79.29 $38.57

62 Step 3: Variable Costs Company Total Payroll Direct Labor $318,355 Training Supplies 17,100 Total Variable Cost 335,455 Total # Dogs 6,885 Variable Cost per Dog $48.72 Group Classes Private Sessions Dog Daycare $145,000 $92,700 $38,650 13,500 1,200 2, ,500 93,900 41,050 1,850 1,175 3,825 $85.68 $79.91 $10.73

63 Step 4: Profit per Service Performed Total Company Fixed Cost per Dog $56.38 Variable Cost per Dog Average Total Cost per Dog Effective Rate per Dog Profit or Loss per Dog $7.32 Group Classes Private Sessions Dog Daycare $79.74 $79.29 $ $23.77 $15.47 ($24.25)

64 Action Plan Profitability by Service Calculate Effective Rate Earned for Key Services Determine Fixed Cost per Dog by Key Services Determine Variable Cost per Dog by Key Services Calculate Profit per Dog by Service

65 Profitability by Service Questions?

66 Profit & Cash Flow Fixes Fill Excess Capacity Increase Conversion Rate Sell More to Existing Clients Obtain New Clients Collections Review Payment Policies Focus on Collecting Timely

67 Profit & Cash Flow Fixes Pricing Review Annually Increase Rates Reduce Discounts Expenses Budget Improve Staff Productivity

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69 Growing a Healthy Business Biz Owner Role Build a Strong Accounting Foundation and Team Monitor Systems to Minimize Risk Analyze Financial Reports Monthly Know Your Numbers Be Confident in Taking Action

70 Questions? Susan Briggs