Finance 101 - Outright.com
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Transcript of Finance 101 - Outright.com
Finance 101
What small businesses owners need to know about their finances
What we will (and won’t) discuss
THE GOOD
Keeping track of your income and expenses
Knowing how your business is doing
Staying organized for taxes
THE BAD AND UGLY
Chart of Accounts, GAAP, Accruals
Balance Sheets, Trial Balances, Inventory Turnover Ratios
IRS Jargon, Audits, Tax Schedules
Sample Income Statement
Know Your Bottom Line
SALES- Cost of Goods Sold- Other Expenses
= PROFIT- Taxes
= “BOTTOM LINE”Why you should care about this simple math:-Know how your business doing-Stay organized for tax-time
SALESSALES = Items you sell x Price
The easiest Finance 101 concept to learn; not so easy to understand
Do you know your customers?
-Repeat buyers?-What are they buying?-When? Where?
Have you tested pricing?
Cost of Goods SoldCost of Goods Sold (COGS) is the money you spend
to make the products you sell
- Estimate your COGS by product- Know your biggest vendors
• In most cases, it’s physical stuff, not the time you “spend”
• COGS is often tracked by a pile of receipts or credit card statements
Other Expenses
Other Expenses are … well… other expenses associated with running your business
- Use categories that make sense to you- Know what expenses are directly associated with sales- What are assets and depreciation?
• Etsy and PayPal Fees• Shipping Fees• Supplies• Website and marketing expenses
• Profit should tie closely to changes in your bank account
We’re not done yet!
PROFIT
Profit is what’s left when you subtract your COGS and Other Expenses from your sales.
- Profitability by product- Profit is what you pay yourself, value of your time
TAXES
Annual Income TaxesEvery year Uncle Sam requires you to file & pay taxes on your small business profits (or losses)
Quarterly Estimated TaxesPay-as-you-go income taxesJan, Apr, Jun, Sept 15 “quarterly” deadlines
Sales TaxYour state requires you to collect sales tax from in-state customers, and pass it along
Annual Income Tax
24% of all small business expenses are categorized as “other expenses” for taxes
- You pay taxes on your profit, not your sales
- Don’t worry too much about categorization… but keep track of income & expenses
- Deductions are good!
- If you owe estimated taxes, pay them to avoid penalties
BOTTOM LINE
A few reminders & tips to wrap up Finance 101
•Keep up with your finances
•Spend time getting to know your key business insights
•Don’t stress about tax categories, but keep track
•Cash is king
Outright helps more than 100,000 small businesses (and more than 6,000 Etsy sellers)
keep track of their finances online
•Automatically gets your transactions from various sources like Etsy, PayPal, banks, credit cards, and more
•Automatically categorizes transactions
•Always up to date, easy to understand reports and charts
•Keeps you organized for taxes
Special deal for HelloEtsy: Outright is FREE through 2011 http://outright.com/helloetsy