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Episode 11 // Eight Fundamentals to Decoding Financial Statements
Championed by our friends at Community Futures Manitoba
It’s time to rip off the blindfold and stop hiding from the numbers.
In today's episode of the Gab Lab, NTN Pro, Shauna Frederick, Founder of Frederick OTG (On the Go CFO) and Co-Founder of the Finance Café, helps us crack the code and decipher the numerical revelations embedded in our financial statements.
As Shauna points out, many of us start our business because we’re passionate about what we do and are excited to bring our ideas to market. Unfortunately however, finances are often the last thing we want to deal with, and when we summon the courage to do so they appear to be written in a language foreign to most Founders.
Today's the day we demystify financial statements
Part 1 // A Snapshot That Speaks Volumes: The Balance Sheet
As Shauna explains in our first of three segments, the Balance Sheet reveals what accountants call the “Book Value” of the business.
ASSETS – LIABILITIES = NET WORTH (AKA SHAREHOLDERS’ EQUITY)
Your business’s value is a financial construct factoring inputs like short, and long term, assets weighed against short, and long term, liabilities.
Tune in as Shauna provides examples of each of these inputs to help you better understand the current "book value" of your business, as you gain important insight into better understanding how 'leveraged' and 'liquid your business is. These are two important calculations every Founder should come to familiarize themselves with, as they tend to be some of the first numbers lenders look at.
Part 2 // The Income Statement: Where the Bottom Line Steals the Show
Don’t let the title deceive you. While the Income Statement serve a different purpose than that of
the Balance Sheet, there is a common link—the bottom line—aka, the "Net Income" or "Net Profit".
As Shauna explains, when your bottom line is positive, you’re effectively adding value to your business because the money ends up in Retained Earnings on the Balance Sheet. But, if y our bottom line is bleeding red, the value of the business is decreasing.
When it comes to the top line, Shauna points out that accountants use an accrual basis of accounting for the Income Statement. Translated, this means when a sale is made, it’s accounted for in your company’s revenue, regardless of whether the payment has been received or not. This, obviously, has the potential to skew the reality of your bottom line results.
Tune in as Shauna shares with us what to watch for in our Income Statement, how often we should be checking it, and what numbers to cross-reference to ensure we’re getting the full story on our bottom line.
Part 3 // The Most Intuitive of the Group: The Cashflow Statement
This, Founders, is where we transition from accrual to cash basis.
We’ve highlighted this in previous episodes, and can't stress it enough:
Profit ≠ Cash
This is why the Cash Flow Statement is needed to complete an accurate snapshot of the current health and functionality of your business.
The Cash Flow Statement is believed to be the most intuitive of all the financial statements as it follows every transaction made by the business—money received and money spent. The sum is referred to as the 'Net Cash Flow".
Tune in to Part 3, as Shauna and Taunya review best practices and warning flags in each area of Income, Cost of Goods, Pricing and Expenses. You’ll uncover ways to unlock the cash currently held captive in your business, and learn how to use a Cash Flow Forecast to deliberately and intentionally plan for a healthy bottom line.
// Download the free tool and templates
The Playbook // Cashflow Forecast // The Highways and Hazards
About the Pro // Shauna Frederick
Founder, Frederick OTG
CFO ON THE GO
After spending close to 10 years in the Oil & Gas Industry working for both public and private companies, Shauna felt the desire to move into a position where she could help people. This decision led her to the CA School of Business where she worked towards her CA (Chartered Accountant) designation. Shauna articled with two accounting firms, the latter being Matthews Group LLP where she was appointed Associate in January 2011 and Junior Partner in January 2012.
Working with The Matthews Group gave her the opportunity to work with amazing mentors who encouraged her to ask questions and understand the needs of the client. Shauna’s focus was working with entrepreneurs and their internal accountants helping improve their systems, processes and overall reporting.
As a skilled Chartered Professional Accountant, Shauna’s strong desire to help others achieve ultimate success and to reduce the stress that comes with accounting led to the creation of Frederick OTG. Shauna’s mission is to make a difference in her client’s businesses; to help them grow stronger than ever as an on-the-go CFO that takes the frustration and anxiety out of the accounting unknowns, helping entrepreneurs navigate the financial and accounting challenges that come with running a business.
Working alongside entrepreneurs, Shauna saw the financial literacy and more importantly financial confidence lacking in many entrepreneurs. Understanding the key role that financial literacy training plays in helping entrepreneurs build financial confidence and ultimate business success, she partnered with a former banker, Shannon Pestun where together they created The Finance Cafe. Through female-friendly pedagogy and support, The Finance Cafe is offering a Financial Literacy Program bringing gender based perspective to financial literacy training.
Shauna is currently working with CPA Canada on a Value Creation Proof Of Concept Initiative as well as providing input into the overall CPA Competency Map
Shauna’s volunteer time includes volunteering for The Women’s Entrepreneurship of Alberta Foundation, Junior Achievements of Canada, The Canadian Women’s Foundation and 10 years with the Famous 5 Foundation where she co-lead the creation and delivery of a Girls’ Leadership Program, a 5-week program focused on building leadership skills in girls.
Shauna is passionate about entrepreneurship, diversity and advancing the rights of women and girls.
About the Champ // Community Futures Manitoba
Community Futures Manitoba Inc. (CFM) is an association representing 16 Community Future organizations (CFs) established throughout rural and northern Manitoba. The Community Futures Manitoba Board of Directors is comprised of one representative from each of these organizations. Community Futures operates across rural and Northern Canada as a grassroots-driven program created to strengthen rural economies by enabling entrepreneurship and assisting in community economic development. The goal of each CF is to assist the communities in their region to develop their economic potential.
Connect //
GAB LAB CHAMP // Community Futures Manitoba www.cfmanitoba.ca // 1.888.303.2232 // info@cfmanitoba.ca GAB LAB HOST // Taunya Woods Richardson taunya@nailthenumbers.com // 1.844.844.3660 NTN PRO // Shauna Frederick www.frederickotg.com or shauna@frederickotg.com
Have an idea for a Gab Lab episode? Looking for help with a specific topic?
Hit us up at helpdesk@nailthenumbers.com
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