As you develop your business, the need for financial information and tracking will grow.
Where is your money coming from?
Where is your money going?
What areas are the most profitable, and what are losing the most money?

A sole proprietor or partnership needs to take this into consideration in order to make sure they are being as effective as possible. Corporations and other businesses need to be aware of their situation at all times as well.

This is where accounting comes along. The basic financial statements that you should be aware of are:

• Balance Sheet - This Statement shows the breakdown of what your business owns (The Assets) and what it owes (The Liabilities) for a specific point in time.
• Income Statement – This Statement will show how your business performed over a period of time. Your revenues and expenses for the time are displayed here.
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I messed up this week. It was like I ordered the soup of the day, yesterday’s soup of the day, and I couldn’t figure out why the waitress didn’t bring me the soup. I’m kicking myself. Why wasn’t I at the cafe yesterday?  Why wasn’t I at the cafe before everyone else yesterday?

Needless to say, I’ve learned my lesson. If you and I want to play with the big dogs, we have to be thinking like them. They’re the people that are always a buck ahead, a step in the lead, and forever laughing at our lags… unless we change.

In whatever financial avenue you’re hoping to strike it rich in, I’m making some adjustments in my strategy that you might want to consider, too.

1. Network: someone’s always going to know something before you.  Buddy up so they’ll share with you. And if you have to pay them a little, I still think it’s worth it.

2. Have your documents lined up: if you want a stock, have money ready to invest ASAP. If you’re buying a huge investment, establish pre-approval with a bank before the deal pops up. Update your income statements, cash flow statements, balance sheet, checkbook; you want to be ready to go by knowing what you have and showing others what you have, too.

3. Be persistent: don’t let one slip slow you. The soup I wanted was sold out; now I’m watching for when it’s the flavor of the day again.

4. Be ready to drop everything NOW: good deals disappear in minutes. You’ve seen how the stock market fluctuates throughout the day. Other markets do the same. Waiting until the time works for you doesn’t work when you want a deal.

Some people obsessed with Cramer on Mad Money dump all of their money into each stock he recommends that day. The following day, those stocks shoot up as everyone wants to buy. None of those people really makes money, though. How could they expect to? They’re ordering yesterday’s soup.
As for everyone who bought the stock right before Cramer’s tip? Oh yeah, they’re stuffing their faces and smirking at us.

Wouldn’t you prefer to pick your soup and eat it, too?

You’re working long hours to bring home the bucks, yet for some reason, your credit card bills never shrink, debts don’t decrease, and you actually find yourself slightly worse off than the month before. What’s going on?

Time to grasp the inflow and outflow of your money:
Cash flow statement.

1. determine your monthly income (tally the following)

net take home pay
tips, commission, bonuses, overtime
second job
alimony, child support, social security
income from rental property
(some people chose to add income from trust accounts and dividends from investments)

TOTAL MONTHLY INCOME: ______

2. determine your monthly expenses (tally the following)

taxes (federal income, state, FICA, property)

housing

• mortgage or rent
• utilities
• homeowner/renter insurance
• internet, phone, tv
• home repairs

auto

• loan/lease
• gas
• repairs and service
• insurance
• parking/tolls
• mass transit

Food

• groceries
• restaurant
• snacks, liquor, morning coffee

insurance/medical

• life insurance
• health insurance
• other insurance
• doctor visits
• medications

household

• home items (like decorations and furniture)
• lawn and garden
• cleaning service or supply
• security system
• clothing
• cosmetics
• hair care
• pets
• vet bills
• club memberships
• vacations
• education
• entertainment
• hobbies
• books/magazines/newspapers
• gifts
• computer/technology

misc

• credit card payments/interest
• loan payments
• child support and alimony
• stamps
• church/charity contributions

total expenses: _____

**We never remember how each penny has been spent. Sometimes, I look at the credit card bill and think, “What did I buy?” Therefore, many financial planners suggest multiplying expenses by 1.1 (110%) to account for the missing money we can’t seem to keep track of. The point is that for every dollar we spend, we also spend 10 cents that we can’t quite account for in our cash flow statements.

TOTAL EXPENSES x 1.1: ______

_____________________________________________

3. Compare the difference
Total income – total expenses = net cash flow

The net cash flow is remaining money you can spend, save, or invest. On top of that, you’ve now inventoried your money. Is the money going to restaurants a bit high? How about entertainment? Here is a chance to start tweaking and saving.