BeautyLink - Volume 8, Issue 2 - (Page 16)

THE BOTTOM LINE: WHAT BY JARED SANDERS I love good stories. One thing that drew me to accounting was it explained how numbers can and do tell stories. Accounting is a summary of numbers which occurred in the past. They tell of where money was earned and spent. It can give you great insights into what is going on with your school. The problem is that a significant majority of owners need a translator to understand what they are saying. Let's be honest, most of the time you need a translator to translate what your translator is saying! Having the ability to read and understand financials, and to be able to effectively communicate that information to a beauty school owner is a skill. Asking the right questions can help you to guide your accountant to give you the information you need to make the right decisions. For simplicity, I have divided the questions into two major groups. What to Ask About the Past 1) How do my financials compare to the prior year? a. This question helps you to review where the school stands in comparison to the prior year. The prior year gives you a reference point. Perhaps you don't recall the exact amount of earnings last year. But you do recall some of the frustrations, or some of the successes. Comparing to the prior year will allow you to consider the state of the school in terms you can connect to. Your accountant should be able to review and discuss differences between the years. A great conversation with your accountant should include discussing what caused those changes. This will help identify problems to address, or strengths to exploit. 2) How do my financials compare to my budget? a. Assuming you had a plan for the year called a budget, knowing how you compared against it will help you consider 16 | B E AU TYLINK | FOCUSING ON F INANC IAL S | 2016 how effective the budget was. A budget is not a tool to limit spending. A budget should be created as an expectation of what you think is going to happen. Comparing actual results with the expectation will help you know how well your expectations were. Do you have a good feel for the future of your school? 3) What trends do you see? a. Remember that most CPAs review financials to tell a story. Trends are the themes of that story. As a school owner, you often can tell what happened to your school. Identifying trends can help you place a dollar amount to the effect of things. What to Ask About the Future 1) Do I need to make any adjustments? a. It doesn't help to review the past and not shift strategy. Even those with a great business, should be looking to stay ahead of the curve. Lower enrollments, might mean a reduction of salary...or on a more positive note, increased enrollments might an increase of salaries. 2) What is my projected composite score/tax income/profitability? a. I put all of these together because no matter what type of school you have, there are reporting requirements which affect the school and you as an owner. They can also be some of the most disruptive events in the financial history of the school. An unexpected tax bill may cause an owner to withdraw resources of the school. Further, a poor composite score may lead to a series of events to cause a school to have a cash crunch.

Table of Contents for the Digital Edition of BeautyLink - Volume 8, Issue 2

Message From the AACS President and CEA Chair
Workings of Washington
CEA Gets Amped Up in Vegas
The Bottom Line: What You Should Discuss With Your CP
Revelations About the Department of Education
Do’s and Don’ts of Shopping for Suppliers — It Isn’t Retail Therapy!
And Then There’s Compliance
Students and Money Management
Voices From the Classroom
Superstar Graduate
Beauty Changes Lives
People & Places
New Products & Services
Associate Member Profiles: Financial Services
New School Members
Upcoming 2016 Events
Index to Advertisers
advertisers.com

BeautyLink - Volume 8, Issue 2

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