Then, you can make accurate comparisons from year to year. Of course, if you have a service business or business with no inventory, the inventory valuation discussion is moot. After you have developed a total dollar value of the goods you have on hand, you can calculate your real cost of sales this way: 1. Add together the goods you purchased during the period

(This total represents the dollar value of the goods you had available to sell during the period.) 2. From that amount, subtract the dollar value of the inventory at the end of the period. 3. The difference is the cost of sales for the period. Heres an example that demonstrates how you do this: Cost of Sales Beginning Inventory from physical count $ 10,000 Add: Purchases during period + 30,000 Subtotal: Goods available for sale 40,000 Less: Ending Inventory from physical count 15,000 Cost of Goods Sold during period $ 25,000 This calculation has more use than merely filling out IRS forms: It can let you know when someone is stealing from you. Suppose you have a good estimate of what the cost of sales percentage should be, either from past statements or from a good understanding of your business. Suppose further that you expect a cost of sales of 61.5% and that you actually had a cost of sales of 77.3%. What does that mean? It co

At any rate, it means that you need to do some serious research to find out what is really happening. 7 Your Cash Flow Forecast and Capital Spending Plan Introduction.............................................................................................................................................................. 122 Prepare Your Capital Spending Plan............................................................................................................. 123 Prepare Your Cash Flow Forecast.................................................................................................................. 125 Required Investment for Your Business...................................................................................................... 135 Check for Trouble...........................................................................................

........................................................ 136 Antoinettes Inventory Problem........................................................................................................... 136 Typical Problems Retailers Face............................................................................................................ 137 122 | quick plan If youve chosen the quick plan method to prepare a business plan (see Introduction), you need to read and complete these sections of Chapter 7: Prepare Your Capital Spending Plan Prepare Your Cash Flow Forecast Required Investment for Your Business. Introduction In Chapter 6, you drafted your estimated Profit and Loss Forecast. While it tells you a lot about the big financial picture, it leaves you ignorant of many details. If you overlook one critical detail, you may go broke, even though your business seems profitable viewed from afar. The crucial detail a business owner must manage is called cash flow. Cash flow is another