Py trrg 157.4 The All-in-One Founder's Toolkit First Quarter Checkpointelm del=a-e MW cR-TecM ama ane ssi critical time of the year: RUM Roma Mies quarter. S bs be] Ei 3 = =< SUR R aR Ok- aemCol did your business fare in Q1? Your finance team and CA are comparing performance and projections, making a budget for the coming quarter... With this toolkit, collaborate with them more effectively - even if you don’t know the PN Tex Mol miata] accounting!Accounting Ratios A guide to accounting ratios that serve as indicators of your business’ financial well-being Financial yal cy Infographics explaining how to read and analyse the 3 most important financial statements Budget and Cash Flow Petey nn) k= aA Mele (Mele ALONG to create and manage a startup budget effectively, with an easy to use templateAccountin Tools Accounting empowers founders. By knowing how your business’ financials work, how to read and analyze the numbers, founders are able to make well-informed decisions for business success.In this section, you get insight into two of the most important accounting tools, that are an absolute basic essential for founders to have: accounting ratios and financial statements Accounting Ratios Accounting ratios are a mathematical measurement of a business's financial performance. Why should you care? + Accounting ratios help you assess your business’ liquidity, solvency, profitability and efficiency + Helps compare performance to industry benchmarks and competitors + Ensures that you have the input you need to make informed decisions for business strategy + The best way to forecast future financial performance Following are 5 of the most important ratios to measure your startup’s financial health. 021. Revenue Growth Rate + + Current Year’s Revenue - Previous Year's Revenue x100 Previous Year's Revenue x What is Revenue Growth A measure of the rate of Rate? increase in a company's total sales Why is Revenue Growth Indication of how much Rate Important? more revenue the business is bringing in vs the previous period How to Improve Your +Expand customer base Revenue Growth Rate? + Introduce new products or services + Increase prices "Bonus Tip! The ideal Revenue Growth Rate for most businesses is 10% to 25% _———— 032. Profit Margin + Net Profit Total Revenue we What is Profit Margin? Why is Profit Margin Ratio Important? How to Improve Your Profit Margin? x A measure of the percentage of each sale retained as profit Helps you make decisions on how to invest in the business, how much to pay employees, and how to price your products/ services + Track business expenses + Focus on high-margin products and services +Control inventory *Bonus Tip! The ideal Profit Margin range for most businesses is 10% to 20% — = 043. Debt-to-Equity Ratio + + Total Debt Total Equity x : What is Debt-to-Equity A measure of the amount Ratio? of debt a company has relative to its equity Why is Debt-to-Equity High debt-to-equity ratio Ratio Important? means business has more debt than equity, which increases risk to default How to Improve Debt-to- +Increase equity Equity Ratio? + Decrease debt +Sell assets if needed *Bonus Tip! +The ideal Debt-to-Equity ratio for most businesses is 1:1 + Capital-intensive industries may tolerate a 2:1 ratio 054. Current Ratio + Current Assets Total Equity we What is Current Ratio? Why is Current Ratio Important? How to Improve Current Ratio? x A measure of a company’s liquidity A high current ratio means that the business has enough to cover short-term debts, which increases confidence +Improving inventory management +Accelarate accounts receivable collection + Paying off short-term debt "Bonus Tip! The ideal Current Ratio for most businesses is 2:1 to 2:0 a 065. Burn Rate + + Beginning Cash Balance - Ending Cash Balance Number of Months x What is Burn Rate? The rate at which a company is spending its cash reserves Why is Burn Rate Helps startups estimate Important? how long they can continue operations before running out of cash How to Improve Current +Increase revenue Ratio? + Decrease expenses + Reduce average total assets at . Bonus Tip! Investors look for startups to have a Burn Rate that allows operations for at least 12-18 months before needing anon additional funding 07Accounting ratios are helpful only when supplemented with numbers from your business’ financial statements. How do you calculate your business’ total debt, or total revenue? I = These numbers are in your financial statements. More specifically, the big three: Income Statement, Balance Sheet and Cash Flow Statement 08Financial Statements Understanding how to read financial statements is very important when managing and growing your business. But you don’t need a degree in accounting to know the naunces of how to read a balance sheet. Here's a crash course on how to read the 3 big financial statements!Income Statement The income statement provides a summary of your business’ revenue and expenses over the quarter. It helps determine profitability and identifies areas for improvement. You can also compare your business’ financial performance over different periods of time, and make informed decisions.Income Statement Company ABC For the month ending 30th June 2023 Income Revenue Total money earned from operations Other Income Total income from sources other than primary operations A Total Income *t2! income carea Expenses Cost of Goods Sold Total money spent directly on operations Finance Cost Total money spent on financing operations Employee Benefits Expenses Total money spent on employee benefits Depreciation & Amortization Tota! money lost to wear & tear of assets A Total Expenses "to! money spent Profit/Loss Before Tax (Total Income) - (Total Expenses) Tax Expenses Total money spent astaxes Profit/Loss After Tax (Profit Before Tax) - (Tax Expenses) z nBalance Sheet The Balance Sheet provides a snapshot of your business’ financial health at a specific point in time. It helps founders make informed decisions about managing assets, liabilities and shareholders’ capital. Most investors look to a business’ Balance Sheet to determine profitability, potential and whether to invest or not, so make sure you keep a share eye on this one.Balance Sheet Company ABC For th = month ending Assets 1. Current Assets Cash & Cash Equivalents Casi in its most liquid forms ‘The amount of money vendors owe to the Trade Recievables -gysiness ana will pay back within a year Inventory The tems used to produce goods & final product available for sale Financial assets that can be easily Marketable Securities cuit and sold on tho market Total Current Assets ®s0urces a company owns or contiol a— 2. Non-Current Assets Property, Plant & Equipment Monetary value ofall tanaible assets 7 Assets that do not have a physical Intangible Assets yistence but contribute to the business The intangible value that a business earns from my Goodwill factors that help it maintain competitive advantage Investments Assets that a company plans to hold for more than one year Total Non-Current Assets (oo5\iiiccnccpentnscce A Total Assets Resources a company owns or controls *Only shows up on the balance sheet in case of a merger or acquisitionLiabilities 1. Current Liabilities Accounts Payable Money the business owes to its vendors Payroll Due Money the business owes to its employees All expenses that have to be cleared within the coming operating cycle Accrued Expenses Income Taxes. income taxes due to be paid Interest Payables Interest due to be paid for financing or to shareholders Short term loans that have to be repaid within the coming operating cycle Short-term Debts Financial obligations and debts that a business owes to others AN Total Current Liabilities 2. Non-Current Liabi ies A type of debt instrument that is issues by a company or government to raise capital Debentures Loans taken on by the company to be paid back over the course of many years Long-term Loans Tax that may have to be paid in the future due to differences between accounting and balance sheet Deferred Tax Liability Lease Long-term lease obligations Pension Benefit Obligation Sorry ‘enc nae forewing Total Non-Current Liabilities z- Financial obligations and debts that a business owes to others Total Liabilities 14Cash Flow Statement A cash flow statement tracks the movement of cash in and out of your business over the quarter. You can use a cash flow statement to identify the sources and uses of cash in your business, and manage cash more effectively. Cash Flow Statement also helps you make informed decisions about investments, financing and other strategies, as well as predict future cash flows. Here is how the final financial statement works!Cash Flow Statement Company ABC For the month ending 30th June 2023 Cash from Operations Net Earnings Company's total profit after accounting forall expenses Total income from sources (+) Depreciation & Amortization ctner than primary operations Fluctuations in a company's (-) Changes in Working Capital current assets ana current liabilities over a given period Cash from Operations. {he estes orwsee by a company's operations, Cash from Financing Issuance (repayment) of Debt Serowesmoncy by company Issuance (repayment) of Equity Sinetsnp sare i company Cash inflorws and outflows related toa Cash from Financing coy .iy/s investments iniong-term assetsCash Flow Statement Company ABC For the month ending 30th June 2023 Cash from Investing Purchase of Fixed Assets Money spent on acquiring fixed assets Proceeds from Sale of Fixed Assets "ony sat. Purchase of Investments Money spent on acquiring investments Processed from Sale of Investment Mok Sane) Net Increase (Decrease) in Cash Total changein cash Cash from Investing 2.700082 ‘The amount of cash the business Opening Cash Balance 220 {52 sccountiny period with Opening cash balance +/- z Closing Cash Balance joccescejsccieaseThe best way to improve or maintain financial health is to create and stick to a strong budget plan. al ™ Making a budget is easier than it sounds - this next section will help you out with justthat. 2— Get ready to wield your financial superpowers and budgets like a boss, because numbers don't scare you, they respect you!Budgeting and Cash Flow Management Knowing how to make a budget is vital to young businesses. Thankfully, making a great budget is super easy - with handy tips and free template!A budget is a plan that shows how much money a business expects to make and spend. It helps founders make smart financial choices and use resources wisely. According to this study by CBinsights, young businesses are highly vulnerable to running out of cash and failing to take off. A solid budget and a foolproof strategy is key to ensuring that does not happen. Here are some handy tips curated from the experiences of successful founders for you to keep in mind when making your budget! Stick around till the end for a free, downloadable budget template. 20Budgeting Tips Here are a few things to keep in mind when you are making your business budget 1 Set Clear Goals: Ensure that your budget aligns with your business goals, whether it is increasing revenue, reducing costs or growth and expansion. 2 Estimate Realistic Income: Be conservative and factor in uncertainties to avoid overestimating revenue. 3 Account for All Expenses: Create a comprehensive list of all your expenses and don't overlook smaller expenses, as they can add up. 4 Be Mindful of Cash Flow: Anticipate when your cash will be coming in and going out, and plan accordingly to avoid cash shortages. 5 Monitor and Adjust Regularly: A budget is not a set-it-and-forget-it document. Monitor your actual financial performance regularly and compare it to your budgeted amounts. Identify any variances and take corrective action as needed. 21Remember, a budget is a dynamic tool that helps you make informed financial decisions. Stay disciplined, review your budget periodically, and use it as a guide to keep your business on track and financially healthy. With these tips in mind, use this free, downloadable, ready- to-use template to get started on your budget right away! cog Download Budget Template With this toolbox, there is absolutely nothing stopping you from shooting for the stars. Keep this toolbox handy, and buckle up for the ride! 22Financial Tools The key factor to a business’ success is good financial management. What does good financial management look like? 1 Ensuring your money is in good hands: A solid banking strategy is key to success 2 Tech-first banking: Less time wasted, less mistakes, less labour. There’s nothing to lose! 3 Keep everyone happy: It is important to pay your vendors, employees and creditors on time to build reliability and trust RazorpayX helps you make your business finances as easy and seamless as possible. With RazorpayX’s suite of solutions to your financial hassles, you get more time to grow your business, build a better product, or just take that vacation. 1 Check out RazorpayX 23If you liked this toolkit, check out more stuff by the RazorpayX Content Team! tcc Alle WCE =e to SU = oo CST