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teacher avatar Desarie Anderson, Cash Flow Management

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

9 Lessons (48m)
    • 1. Introduction

    • 2. Lesson 1 The importance of keeping good accounting records

    • 3. Lesson 2 Is it time to switch from a spreadsheet to software

    • 4. Lesson 3 Difference Between Gross Profit and Net Income

    • 5. Cash Flow Step 4 What is cash flow management

    • 6. Lesson 5 The difference between cash flow and net income

    • 7. Lesson 6 The Cash Flow Worksheet Excerise

    • 8. Lesson 7 Hands On Project

    • 9. Final Thought

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About This Class

We have all heard the saying "CASH IS KING."  The old-time phrase is extremely relevant if you run a small business.    

Without sufficient cash flow, a business will most likely fail even if the business has consistent positive monthly net profits.  

This class will demonstrate the difference between cash flow and net profit.  The class will also provide you with a simple tool that will help you understand and visualize how profit and cash flow work side by side. 

Meet Your Teacher

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Desarie Anderson

Cash Flow Management


I am originally from London, England but currently live in Atlanta, GA with my husband David.

I always joke that I have had the distinct pleasure of using both the left and right side of my brain. I owned and operated a hair salon for over 17 years (Right side), and now I own a small Tax and Accounting practice (Left side). So you can get your hair cut & colored and get your taxes done all in one visit.

I graduated from Georgia State University with a BA in Accounting. I am a Georgia CPA and an IRS Enrolled Agent. I am also a certified QuickBooks online Pro advisor.

In addition to providing small businesses with bookkeeping and accounting services, I am passionate about helping small businesses manage their cash flow. No business can survive without proper c... See full profile

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1. Introduction: Hi, My name is Desmarais. I am a C p A and a QuickBooks Pro Advice as a C P A. People automatically a seem that my business revolves around taxation. Well, that's not necessarily true. I work with a lot of store businesses and independent contracts is mainly trying to help them manage their cash flows. Now cash. It's king. Without cash, a business cannot run. So it's really important that as a business owner, manager cash flow in such a way that if for some reason your business is going through a bit of a struggle for a few months, you're still able to keep your business going, mainly because you have you have proper cash flow to do so. I have manage your cash flow at the time when business was good and now you're able to actually sustain yourself. Even though the business is is in the red, say, for about 3 to 4 months, my class focuses on cash flow management, which is the overarching subject matter of what I teach was in cash flow management, several sub topics. But this particular class we're going to be focusing, focusing on understanding cash flows on what the differences between cash flow and net applying. What you have learned is the best way to understand and master a topic, so you will be able to download the actual spreadsheets that I will be using to teach this class. This project should help you determine the funnel using Attack spreadsheet to determine how much cash you have to cover. Expensive in the event your business has a few months off. Subsequent must input your previous and your current month's income and expensive, as well as your beginning cash into the spreadsheet. Question. Can you survive 2 to 3 months of negative income without facing the possibility of shutting down your business? Do you have a positive or negative cash flow I really hope you enjoy. And then a lot of this class and hopefully I'll see you in the next section. 2. Lesson 1 The importance of keeping good accounting records: Hi. Welcome back in this section. We're going to be discussing the benefits of maintaining good accounting records and finally, isn't why doing so will help your business in the long run. Number one monitor where your money is going at all times. When you keep proper accounting records, you know exactly where your money is going and how much you're spending in each area of your business. Not tracking your expenses can result in spending too much money in certain areas and not enough in others. And the end result being not having enough left over to cover expenses that are vital to the success of your business. Number two. Borrowing funds to help with cash flows and operations. The key to any successful business is the ability to manage. Limited resource is there are going to be times that a small business may have to borrow money to help with bills, funding, payroll or even restocking inventory or any other expense needed to keep the business running. Your financial records are one of the first things a lender will request. These records are what can determine whether or not a bank or a financial institution will be willing to give you a small business loan. Number three Saving money at tax time. None of us get excited about paying taxes. As a matter of fact, most of us will be happy paying as little taxes possible. And that is why keeping proper accounting records is essential for tax preparation purposes . One of the biggest disadvantages of not maintaining your books is the loss of tax deductible expenses. It is almost impossible to keep a mental notes of everything you spent the year before. I mean, let's face it. One of the smartest things that you can do for yourself and for your business is to take advantage of all the deductions allowed by law. This is hard to do if you do not have records to prove your claims. In addition to that, imagine how much money you can save. If you just handed your accountant a financial statement rather than 12 months of bank statements and expect him or her to sit through a sea of transactions before he or she can even start preparing your arm, your taxes. Now you're paying for not only tax preparation services but also for bookkeeping. Number four managed the growth of your business. In order to grow your business, you have to plan for future sales as well as the future expenses associated with future sales. To do this, you need proper reports to help guide your decision. By keeping proper reports, you are better able to plan for the future growth off your business by determining where improvements need to be made. In your comment. Business Model number five Finding relevant information At any point in time, you may need to look up financial information quickly, such as your income for a particular month or income for the last quarter. By keeping accurate financial records, you'll know exactly what you need to know. At any given time, good financial records will allow you to make changes to certain aspects off your business before it is too late. Finding out at tax time that your business suffered six consecutive months off. Financial loss is not the best way to run your business. If you want to stay in business in the six months that your business experienced losses, you may not have realized that you that your business was surviving off of financial reserves. You would, however, have realized this if you had consistently maintained your books. Such unexpected surprise can eventually hurt you 3. Lesson 2 Is it time to switch from a spreadsheet to software: high in this section, we're going to be discussing when it might be a good time to your business to consider using accounting software. At some point, as your business starts to grow, it might be time for you to start considering transitioning from using a spreadsheet for record keeping to using accounting software. Here is the reasons why you may be ready to make the switch you need to generate high level reports like income statements, the cash flow statement, the balance sheets and so on. If you need these types of reports, you are ready to start using an accounting software, adding staff or contractors to your business. Your business is growing, and you may be planning on hiring an employee or a contractor who needs access to your books. QuickBooks QuickBooks offers an audit trail that allows you to see who may changes to your records and when such changes were made. Excel, on the other hand, does not offer Elektronik records. In addition, it's much easier to keep up with the most current version off your books. When you are using a software system, for example, your accountants or employees may make a change to an account. And if you are using a spreadsheet, it may become difficult to keep up with the most recent updated spreadsheets, purchasing equipment or other efforts like vehicles or computers for your business once your business starts growing to a point where you need to purchase high dollar assets to keep the business going, this is an indication that it may be time to consider purchasing accounting software, making the switch from using a spreadsheet toe accounting software is usually based upon your individual situation and your individual needs. It is not a one size fits all decision. 4. Lesson 3 Difference Between Gross Profit and Net Income: high in this section, I'm going to be talking about gross profit and net income and how to calculate each one. I will also be discussing how to use gross profits and net income to do a general analysis all your business. What is growth profit? Gross profit is a company's total revenue equivalent to total sales, not including the cost of such sales. So costs of goods sold or cost of sales is the actual cost of creating or purchasing the products that a company sells. Therefore, the only closet included of those that I directly tied to the production or the purchase off the product. If you are strictly a service business, you won't have cost of sales. For example, I'm an accountant, so I offer a service. Therefore, costs of cells is not an expense I incur. On the other hand, if you run a clothing store, the amount you pay to purchase your clothing for resale is considered cost of sales. One of the most important concepts of running a business is knowing how to compute gross profit. Gross profit is computed a sales minus costs of goods sold, which equals gross profit. Net income is a company's total profit, and it is calculated as follows growth profit minus total expenses equals net profit. Remember, when calculating that profit, you begin with gross profit, and then you subtract all the expenses associated with running your business. Net income is also referred to as net profit. Now think about some of the stories we hear on the news about a company's earnings for any given year. 95% of the time. The news usually reports a company's total revenue. So when you hear that General Moto's had total revenue of $1 billion in the prior year, we automatically assume that they're not paying their employees enough relative to their earnings. But what the news may not report is that the same company may have had expenses of 1.5 billion, which means they actually had a net loss, but that yet? So just think about how these numbers are actually derived. The next time you hear one of these stories on the news how to use gross profit and net income to do a quick general analysis off your business. Now the information I'm about to discuss is very general. Keep in mind that there are other variables to consider when doing an analysis off your business. Gross profit is most useful when put into context based on the industry in question, because gross profits can vary greatly between industries. For example, comparing the gross profits call the hair salon with that of in law. Practice is not useful. In order to determine how your business is doing and whether you need to make changes to your business model, you should compare your gross income to the growth income of a similar business. This information will help you establish whether or not you are maximizing your resource is and a such maximizing your profit. Net income is another simple indicator and is used to analyse the overall financial health off your business. You want to see net income increase over time and be relatively higher than previous months , quarters or years, depending on how often you measure your company's output. Just make sure you use the same timing to measure output so that you are comparing apples to apples. You can change your measurement period at any time. There is no right or wrong choice 5. Cash Flow Step 4 What is cash flow management: Hi. Welcome back in this section. I'll be going over the definition of cash flow management on why cash management is important. Cash flow management is the management of cash inflows and cash outflows related to a business. In order for a business to be successful, it must plan its future cash requirements. Tow. Avoid a crisis of liquidity in the near future. A business is considered to have positive liquidity if it has sufficient cash flows on hand or the ability to access cash within a very short period of time. Trying to run a business without managing cash flow is like trying to ride a bike without a pedal. Even if you succeed, it will be an uphill battle that is guaranteed toe wear you out. So now to the question, why is Cashel management important? Cash flow management is important because if a business runs out of cash and is unable to obtain new financing, it will become insolvent. Insolvency means the inability fully company to pay its debts once a business has reached its points is not likely that that business will survive. That's why it's really important to keep an eye on your company's inflows and outflows so you could uncover and address any issues that may come up before they become big problems. The 1st 1 is accounts receivable, accounts receivable is what your customers or your clients? Oh, you now not all businesses have in accounts receivable. So if your business model is one that allows customers to come in, purchase a service, a purchase, an item and pay for it after the fact. Then you have accounts receivable, which means that you need to manage these receivables now. Every come. Every company has its own terms. Some companies require payments in 15 days. Some require payments in 30 days, some 45 some 60. Now, the number of days that you require payment does not really matter. What's important is that your customers pay you within the hour allotted amount of time. So if your company model is to allow customers to pay for their items within 60 days, it's your job to make sure that they actually pay for these items within the 60 days. The 2nd 1 is accounts payable. Accounts payable is what you owe your vendors. Now, in order for you to pay your vendors, you have to collect money from your customers. If your customers are not paying their accounts receivable on a timely manner, you can't pay your vendors on time. And if you don't pay your vendors on time, they may decide to stop supplying you with items that you need to actually make sales in your business. And if you can't make sales for the business, what happens? The business makes no money and you can go under. So that's why it's very important to manage receivables and to to manage payables. The final item is suffering from a short for now. While none of us want to suffer a short ful, it's all. It's inevitable that at some point all of us are going to have a short for. But what's important is if you're managing your cash flows and keeping an eye out on your inflows and outflows, you'll be able to determine if a short four is on the horizon. And if it is, you can actually do things to try to work around such a short for 6. Lesson 5 The difference between cash flow and net income: hi and welcome back. There is some confusion at times about the difference between net income in cash flow. So in this section, I'm going to attempt to explain the difference between the two. Cash flow is not the same as net profits. Some people use the term interchangeably, but they are very different, and it's important that you understand the difference between the two. Having more expenses than income does not mean you have a cash flow problem. So in other words, it is possible for your expenses to exceed your income for any given month without you suffering from a cash flow problem. So what a cash flow problem means. It means that you do not have enough cash to cover your expenses when they come view, even though your income exceeded your cash, exceeded your expenses for that particular month. When this happens, you have a cash flow problem 7. Lesson 6 The Cash Flow Worksheet Excerise: hi and welcome back in this section, I'm going to demonstrate and exercise managing your company's cash flow by using an Excel spreadsheet to show cash inflows and cash outflows, you will see how cash flow and net income work hand in hand for this exercise. We will only focus on the 1st 3 months of the year. The goal is to show how one month of net loss affects the businesses, beginning balance for the next month and how to avoid a potential crisis if you ignore the prior month's losses the company will be using for Today's demonstration is called David's Apparel. It's a clothing line located in Atlanta, Georgia. Now this particular business has an online and a brick and mortar presence. This means that David's apparel self is closing both online and a an actual location in Atlanta. The company is brand new in January is its first month off operations. So let's start out by explaining the different areas within the spreadsheet Now. For those of you that have taken prior sections off this course, you're going to notice that some of the terminology that will be using has been addressed in other sections of this course, so you can always go back if you need a refresher. Okay, so number one total sales revenue total sales revenue indicates how much your business brought in through sales of your core service. So in this case, David cells closing, and he sells clothing both online and at his regular stole in Atlanta. So his total sales will be considered everything that he sold online and everything that he sold within the store in Atlanta. All of that act, added together, is what David's total sales revenue will be for the month of January. The second thing is cost of goods sold. Cost of goods sold indicates how much you spent to acquire the goods that you sell to your customers. So for Davis Apparel Store, the cost of goods sold for him will be all the clothing and the jewelry and the purses or any other accessory that he purchases for actual sale within the store. Now, in addition to the cost of goods sold being what he paid for the actual product across the good soul also includes all the expenses that it took to bring those products to the store . For example, if he ordered the items stay from California, and he had to pay shipping costs from California to Atlanta. Whatever the shipping cost is is also part of cost of goods sold, so you would have the cost of the actualize him, plus the cost to ship the goods. The aggregate of that is considered cost of goods sold the next ice and is gross profits. Now, gross profit is your total sales revenue minus your cost of goods sold. So, in this case, David's total sales. That's everything that he brought in for the sale of his products, minus the cost of goods sold. Whatever the cost is that it cost him, sue them for the items that he sold equals gross profit. The next item is total expenses. Now. Total expenses indicates how much you paid out in expenses in order to keep your business up and running. Now for total expenses. That's the items with within this area is going to differ from business to business because every business has its own type off unique expenses. But there are certain things that are common between all businesses. For example, if you have employees, you're going to pay wages if you work half of a location, you're going to have to pay rent. More than likely, you're going to have office supplies. They're going to have a license, fees, repairs and maintain INS bank charges so on and so forth. So these type of items are pretty common across the board. There must, no matter what type of business you have now, there's one thing that I would like to mention when it comes to, um, expenses. If you notice some of the expenses have f by them and some have the now F means fixed and the means variable on what that is is a fixed price or fixed cost. It's something that stays the same month after month after months, whereas a variable cost. It's something that can change between the different months. So whenever you're trying to control costs or control expenses, the only things that you can that you can truly control are the variable costs and not the fixed cost. For example, rent that's a fixed cost just because you're having a bad month, you can't request that your landlord would you lower your rent for that particular month? The ranch is going to stay the same month after month after month, No matter how good or bad of a month you're having, the next item is net profit. Now that profit. This is gross profits. That's your gross income minus your total expenses, and all of that equals net profit. This is the amount that's left over after all the expenses have been paid, this amount can be reinvested back into your business or saved for future cash flow needs. The next item is beginning cash balance. This is amount of cash you have on hand at the beginning off each month. This amount should not be earmarked for any other purpose, but to help cover expenses if and when needed. In David's case, this is his first year in business, and he decided that he was going to invest $10,000 to help with cash flow needs in case he has a short for. So he has $10,000 stashed away in the bank somewhere. And the reason why it's important that the money that you haven't reserved is not earmarks for anything else but cash flow needs is because the whole idea behind cash management is trying to project the future. We're trying to project the future for short fall for the company. So in order to do that successfully, you have to make sure that you have enough money in reserves to help cover any shortfalls that you do have in the long run. Now the whole idea is to not suffer from a shortfall. But realistically speaking, at some points within the year, we're all going to suffer some type of short for and finally we have the ending cash balance. This amount is comprised of the balance at the beginning of the month, plus your net income for that same month. So, in other words, this is a total amount you have in reserves. The larger this amounts, the more likely your business will survive even if your business has a few months of negative income. So to make a long story short, this is the number that we all need to keep our eye on. So now we're going to start plugging some numbers so you can get a visual understanding off what I've been blabbing about this entire time. I'm only going to demonstrate this exercise using the 1st 3 months of the year so In the month of January, David's apparel had online sales off $15,000. He had okay, so that's why didn't this call him? And that was changed at 2 15,115 So he had online sales of $15,000. He had regular sales off $25,000 for for a total sales revenue off 40,000. So cough a good sold was $10,000. So David's growth profit was 30,000 so down to expenses. So David has one employee. He works at his store, and he has one employing this particular employee. He pays $3000 every month. Now, even though on this spreadsheet, as you can see, wages and benefits are annotations as annotated is being a fixed expense. Well, wages can be a fixed expense, but they could also be a variable expense. So we're just going to assume for this particular situation that David's wages and benefit expense is a fixed expense because he has one employee and he plays her flat see off $101,500 every two weeks. So in this particular scenario, wages and benefits is going to be a fixed expense, so she gets $3000 every month. Rent is also a fixed expense, and he pays rent off $3500 a month. Office supplies for this month was $1500. License and legal fees came Teoh, $1200. Maintain it's the repairs came to 5000. Bank charges came to 900. Now, bank charges in David's case is four clients who pay or other customers who pay purchase items using a credit card. So he accepts these Master American Express, and he has to pay, um, these credit card companies a fee for for the pleasure off taking credit cards. So that fee for this pick of the month was $900 and telephone was to 50. That's also a fixed expense utilities. For the months of January, with 1800 insure, Mintz was $2500. Advertising and promotion cost him 5000 this month, and finally interest payments cost him to 75. David has some type of loan out, so the loan, the interest portion of the loan was 25 $275 that's considered a business expense. So for the month of January, David's total expenses came to 24,925 leaving him with a net profit off 5000 75. His beginning balance was $10,000. So this is a 10 fact. This is the $10,000. If you remember that David started out with, It's a $10,000 or he put in his and he put in his accounts for reserves. So at the end of the month, ending cash balance for the cash balance, the David was 15,000 75 now for the month of February glee because this is going to be an ugly month for David's, the Parral. So for online sales in the month of February, David had $30,000 which was a lot better than last month. For regular sales, he brought in 28,000. She's also great, so so far, David has made more money in February than he did in January. He had costs of goods sold for $15,000. Sorry, $15,000. So that leaves him with a gross profits of $43,000 which is $13,000 more in January. For so far so good things looking up. Okay, So down. So expenses. He paid his his one employee $3000 for the month. He paid rent off $3500 for the month. Office supplies came to $2500 which is about $1000 more than last year. I'm sorry last month, Not really sure why there is. But maybe they had more going on in the office in February than they did in January. Life in the legal fees. Nothing for the month of February repairs and maintains so in the month of February, a pipe bust in David Stool. Now, under normal circumstances, he is a tenant, so his landlord would pay for the cost over Pez. But he got into a on argument with his landlord. His landlord said that he wasn't going to pay for the cost of repairs. So David decided that he was going to go ahead and pay for the repairs himself because at the end of the day, it is his store and he wants to make sure that the doors are open. So he said he was gonna pay for that. He was going to pay for the repairs himself and deal with his landlord at a later time, and the cheapest price that he got was $20,000 so it cost him a whopping $20,000 to fix the busted pipe. Bank charges for February with was $1500 which was quite a bit more than last month. But that's that's to be expected, considering his his total sales for the month of February were a little bit higher than the month of January. Telephone came to 2 50 Utilities this month came to 25. That's also a bit higher, but we can see why. More activity in the stool for the month of February Insurance with 2500 advertising for the months of February was 10,000 so he doubled in advertising for the months off February . Not sure why he did that, but for some reason he decided to pay twice as much for advertising in the month of February than he did in the month of January. And then, finally, the interest payments on his loan came to $270. Okay, so, as you can see for the month of February, David's apparel had a loss off a little bit over $3000 so he had a gross profit of $43,000 . But he has he, but he had expenses or $4600 now. Fortunately, David had a positive cash flow at the beginning of the month. So as we can see at the beginning of the month, his cash balance was 15,075 now because his cash balance with 15,075 David was still able to cover all of his expenses for the month of February. Now, because David actually manages his cash flow, he notice that in February his business had a loss of $3000. So his main goal for March was not toe have a repeat off February's loss. So the best. So the best thing that David could do under these circumstances is to try to adjust his variable expenses. For the month of March, he had revenue on my sales of $7000 and he had regular sales off $15,000. His cost of goods sold for the month for the month of March WAAS $5500 for a total gross profit of 16,500 Now this is way lower than January and February. So not sure what happened in the month of March, but people obviously weren't buying shoes, dresses, clothes or anything else, so he had a pretty poor month. Okay, so wages, wages stay the same. I keep in mind that David I realized that he had that $3000 lost in the month of February. So now he wants to make sure that he plays particular attention to what his spending on various items for the month of March. Wages and benefits stay the same. It's a fixed cost to him, so that's going to be $3000. Whether or not he has a profit or loss for any given month, rent also stays the same. It's going to be $3500 regardless, office supplies. It's a variable expense. So in the month of January, he spent 1500. The month of February, he spent 2500 well, this this month he decided to really, really control how much supplies he and his employees were using on because he paid attention to how much supplies the business was using. He was able to cut costs well expenses for that for this month to $500. License and legal fees. Zero. Once again, repairs and maintenance will repairs and maintenance this month, and goodness only came to $250 bank charges for the month of March. We're only $500 you can see it was way less than the prior month's. That's because expenses and rather, that's because the total sales for this month were a lot lower than January and February. Telephone is a variable expense, Sorry fix expense. So that does not change. Utilities is a variable expense, and for the months off February or rather March, it came to about $2200 which is relatively high compared to the total failed for that month . But he definitely made sure he told his employees to make sure that she turns off all lights in the break room and to try to preserve as much electricity as she possibly can. And he did the same thing. So it came. It came down by about $300. Insurance is a fixed cost, so that stayed at $2500 regardless of whether the business has a profit or a loss. David cannot call up the insurance company and tell them that he's having a bad month. Still, can he now clicks? Can he please pay less for this month? Insurance companies going to say we don't think so. So that stays at $2500 advertising for the month of February. He paid $10,000 which was quite high, so he decided in the month of March he was going to cut his coat according to his sides, and only paid $3000 advertising because the end of the day, we must advertise. Otherwise, nobody's going to know that we're actually here. And finally, the interest payment for his loan was $265. So in the month of March, David Parral had net income off $535. I can almost guarantee you that if David didn't take the time to manage his cash flow, he would. He would not have even noticed that he had a $3000 lost in the month of February. He more than likely would have had a lost in the month of March as well. He would've probably paid more for advertising more than $3000 advertising. I can almost bet he would have paid much attention to office supplies, and therefore this number would have likely been more. And he may not have been turning off lights every time he left the room or may not have been telling his employees to turn off life every time he left the room and is a possibility that the utility bill would have been higher. So he and if that was the case, did that did happen. He would have had another loss in the month off March, and if that loss was less than what he actually had in cash little reserves, he still would not have noticed that he had a loss and what would have eventually happened ? He would have just kept on having losses month after month after month until finally, he wouldn't have been able to pay his bills, and he would have looked back to see what what happened. And he would have noticed that he had consecutive months of losses. And by the time he noticed, let's just assume in the month of June, by the time he noticed that he has had losses for the last three or four consecutive months , it would have been too late, and he would have been in a position of possibly having to shut down his business. So the purpose of this exercise was just just just to show you the importance off managing your cash flow and looking at these these numbers and looking at how the net income and cash flow work together. So let me emphasize that so the net profit in the months off see January with $5000 and the cash the cash balance with $10,000 which left him with a beginning balance in the month of January or rather the months of February $15,000. Okay, so in the month of February, he had a loss of $3000. So the cause he has a lot. He had a loss of $3000 that reduced his cash reserves from 15,000 to 12,000. In the month of March. He had a net profit off $535 so that $535 if we add that to the beginning balance off 12,000 that now increases his cash for his cash reserves from 12,000 to about 12,500. So this is the relationship between net profit and actual cash balance. 8. Lesson 7 Hands On Project: high in this section, I'll be providing a brief overview off the class project. This is a hands on project that will allow you to evaluate your cash flow. The spreadsheet can actually be used for business or personal purposes if you want to use to. If you want to use it to evaluate your personal finances, all you have to do is change the accounts used in the expenses and revenue sections. Now let's go over a few steps. You're going to start by imposing. You're beginning your beginning cash balance into Row 26 off the month you are using to begin the exercise. So, for example, if you decide to start the exercise in the month of April, you're going to put your beginning balance for the month of April into Line 26 which is the beginning cash balance. So let's just use small numbers and let's assume that you're beginning cash balance in the month off. April is $5000 for your input, $5000 into this fell. The next thing you're going to do is you're going to input your income and your expenses for that same month. So for the month of April. Whatever your income and expenses are, is what you're going to input. So let's just say for the months off April you only had regular sales and yourself came to $10,000. And for the sake of this project, let's just esteem. He only had one expanse, which was rents, and that waas $2000 look at the net profit line in real 25 to see if you had a profit or loss for that particular month. So Row 25 his net profit. And for the month of April, you had a net profit off $8000. So now we're going to add your net profit from that month from line 25 which is right here . You're gonna add that to your beginning cash balance for the same month, which is lying 26. That's $5000. The total should equal wrote 27 which is your ending cash balance for the month and you ending cash balance for the month is $13,000. This is the amount you have in your accounts for future cash flow needs. Now, hopefully, this amount is a positive number. If it isn't, he should seriously consider reducing your variable expenses or increasing your cash inflows. Remember, your variable expenses are the expenses that change every month. For example, office supplies off there will expenses. Repairs and maintenance are considered variable expenses. Utilities are also considered variable expenses. And as I mentioned in a former lesson, six expenses cannot be changed that these are going to stay the way they are. So once you're done with April, so in the month of May, what you're going to do is you're going to take the ending cash balance the April, which is $13,000 you're going to plug it in, plug it into line 26 so that now becomes your beginning balance for the month of May. So you're going to input $13,000 right here and now. This amount is your beginning balance for the month of May. So will you input maize income amaze expenses when the income is going to either adds or subtracts from your beginning balance, you're going to have an end balanced and the course that and balance is going to be carried over to the month of June, and that's how it goes so on and so forth. So don't forget to download the spreadsheet, start the exercise and feel free to ask questions or make comments. 9. Final Thought: thank you for taking the time out to watch my class. I hope you enjoyed it. I hope you learn something and hopefully I'll senior in future classes.