San Francisco, CA (PRWEB) April 23, 2012
Books in Balance managing partner explains, "there are three different focal topics that will be covered during the workshop, the 'three key foundation' points."
1. Break-Even Analysis which determines the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point.
Break-even analysis is a supply-side analysis; it only analyzes the costs of the sales. It does not analyze how demand may be affected at different price levels.
For example, if it costs $50 to produce a widget, and there are fixed costs of $1,000, the break-even point for selling the widgets would be:
If selling for $100: 20 Widgets (Calculated as 1000/(100-50)=20)
If selling for $200: 7 Widgets (Calculated as 1000/(200-50)=6.7)
In this example, if someone sells the product for a higher price, the break-even point will come faster. What the analysis does not show is that it may be easier to sell 20 widgets at $100 each than seven widgets at $200 each.
A demand-side analysis is often overlooked in key areas such as this.
2. P & L Forecast, is more of a “what if” analysis. This gives a business a financial glimpse of beforehand senerios. A Profit and Loss account is designed to show the financial performance of a business over a given period and indicates whether it is presently making or losing money.
3. Cash flow analysis involves examining the components of your business that affect cash flow, such as accounts receivable, inventory, accounts payable, and credit terms. By performing a cash flow analysis on these separate components, a business will be able to more easily identify cash flow problems and find ways to improve cash flow.
Books in Balance staff accountant says her client reactions are often, “Overwhelmed!" She also added, "Many small business entrepreneurs feel burdened by the thought of doing most analytical tasks when it comes down to it. However, bookkeeping and accounting is not an area to compromise. Now is the time to form good habits of calculating costs and potential profits, if a business is to succeed. Do not undervalue the significance of seeking out a skilled accounting professional. It is in the best interest of creating and maintaining a good foundation for success.”
Books in Balance is based in San Francisco, CA and provides over 25 years’ of combined experience in accounting, bookkeeping, taxation and business management working extensively with the small business entrepreneurs to help them maintain good financial data every step of the way.
Call (415) 979-0706 to register for the upcoming April 30, 2012 workshop.
More information is available at http://www.booksinbalance.net