The Importance of Good Information

Preface: For if any be a hearer of the word, and not a doer, he is like unto a man beholding his natural face in a glass: for he beholdeth himself, and goeth his way, and straightway forgetteth what manner of man he was.” – James 1:23-24  (KJV)

The Importance of Good Information

Imagine you are rowing your boat upstream in a creek while drinking from a fire hose as water overflows the sides and leaks in through a hole in the floor. Water surrounds and pushes you.  Running a business can be like that. Information can nearly inundate an entrepreneur. There are reports on your desk of work that was completed, and someone is standing at your desk talking to you. Meanwhile, the phone rings incessantly in the background.

If you need to go somewhere in a boat and water is inundating you, the solution is not to stay out of the water. The solution is to use the water wisely to get you where you should go. Likewise, business owners may be flooded with information.  The answer is not to eliminate information.  Instead, gather the correct information and apply it wisely.

What Information to Get?

First, what information should a business owner seek out? Although the exact information that is helpful may vary from business to business, here are examples that might be useful.

What do customers want? This question could apply to former customers (why did they leave?), current customers (why are they buying from me?), and future customers (why would someone else want to buy from me?).

What can we provide? What product or service can your business offer? At first, this question might sound silly.  Business owners already know what they do, right? Is there perhaps a new offering or a tweak to an existing offering that be helpful? For example, suppose a business specializes in roofing.  Would there be benefit in adding siding to the lineup of work? Maybe or maybe not but asking what you can provide with excellence is a good question.

What have we done? You can gather information on how many products you have sold. For example, perhaps a business sold 1,000 green widgets and 1,500 blue widgets.  You can gather information on what you have done financially.  How much were your sales, your profits, your debts repaid or incurred?

How did we do it?  Businesses can document their processes for work.  If you develop a great way to efficiently work with excellence, consider documenting that information to help you repeat that work. Use that process to train new employees to learn and repeat that good work.  Documented processes don’t need to be volumes upon volumes of data.  To start, document the most important part of the most important processes.

Getting Information

If you want to know something, ask questions.  Whom should we ask?  First, consider asking yourself.  Perhaps if you sit down and think about it, the answer might come to you.  Also, consider asking your customers.  Without customers, businesses die.  Customers are a wealth of information.  Also, ask other business owners.  Consider joining a business group of like-minded business owners who can encourage each other and provide valuable information.

Sometimes, simply asking a question might not get you an answer.  The person you ask might not know.  You might have to seek diligently for it.

There may be books and articles that contain knowledge that’s applicable to you.  Have you checked to see if there are periodicals or books that would help you in your business?

In some cases, seek out specialists.  If you have a legal question, consider reaching out to an attorney.  If you have a tax question, talk with your accountant.  If you have a product question, consider calling the manufacturer of that product to see if they have input.

Sometimes you might need to experiment and develop something yourself.  If you want a product to accomplish something new, you may need to use trial and error to accomplish that.

In some cases, you might need to travel somewhere to see other businesses and talk with them to learn more about how they do things. You might go visit the manufacturer of a product you buy and talk face-to-face and get a hands-on demonstration.

One fabulous source of information is your records if you track information in an accessible way.  If all your receipts, bills, and bank deposit slips are thrown in a shoebox and never organized, it might be hard to know the health of your business.  On the other hand, if detailed accounting records are kept, that information might be very helpful.

What information should you record?  This can vary from business to business.  Think about your business, and what information you want to know.  Do you want to know how many widgets you manufactured, how many customers you have, what months have the highest sales, which states you ship products into, or what do you want to know?  Consider asking others with a similar business what information they record.

The information that is around us might not be helpful if we don’t review it.  Do you have a regular rhythm of reviewing your information and making changes accordingly?  How does your information from last month compare to the previous month?  Is it the same, better, or worse?  Do you have industry information to compare it to?

Acting on the Information

A person could dehydrate in the middle of a creek if they didn’t drink the water that surrounded them.  What will you do with the information that surrounds you?  Are their products that you should stop selling, or tweak?  Are there new products that you should start selling? Is there a new state in which to register for sales tax?

After you gather information, wisely consider your next steps. After you decide what you need to do, then go and do it.

Growth Through Numbers: Effective Financial Planning for Small Enterprises

Preface: A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” – William Feather

Growth Through Numbers: Effective Financial Planning for Small Enterprises

Navigating the financial aspects of running a small business can be daunting, yet creating realistic financial projections is crucial for long-term success. Accurate forecasts help you make informed decisions and prepare you to meet future challenges effectively. This guide provides essential tips to help you develop reliable financial projections, ensuring your business remains on a path to success.

Establish Realistic Financial Goals
The foundation of solid financial planning is setting realistic and achievable goals based on your current financial situation. Begin by conducting a thorough review of your financial statements to understand your revenue streams, expenses, liabilities, and assets. This detailed knowledge allows you to set goals that are ambitious yet achievable, aligning with your business’s operational capabilities and market realities. By establishing clear, measurable objectives, you create a roadmap for growth and stability that is both aspirational and grounded in financial prudence.

Research Industry Trends
Keeping a pulse on industry trends is crucial for predicting future financial scenarios. Research to identify emerging opportunities and potential risks within your industry. This insight helps you adapt to changing market conditions and anticipate shifts that could impact your business. Whether it’s new technology, consumer behavior trends, or regulatory changes, staying informed enables you to adjust your business model and financial projections to stay competitive and resilient.

Develop a Comprehensive Budget
A comprehensive budget is essential for tracking and managing your financial resources effectively. This financial tool should detail your expenses and predict future costs, helping you to allocate funds efficiently. A well-maintained budget ensures that your spending aligns with your financial goals and highlights areas where cost reductions can be made. Regular budget reviews allow you to stay on top of financial commitments and adjust your spending patterns as necessary to maintain financial health.

Digitize Financial Documentation
Digitizing critical financial documents is essential for streamlining your small business’s operations. Storing files digitally not only saves space but also ensures easy access and enhanced organization. Saving documents as PDFs offers the added benefit of maintaining formatting consistency across various devices. Using a PDF maker allows you to effortlessly create or convert any document into a PDF, adapting to your needs. Embrace this change with a PDF maker to improve your document management process.

Estimate Incoming Revenue
Accurate revenue estimation is pivotal for effective financial planning. Base your revenue projections on a detailed analysis of past performance and forecasted sales figures. This method provides a realistic view of potential income, helping you to plan for future growth and investment. Regularly updating your projections to reflect actual sales results and market conditions ensures that your financial plans remain relevant and responsive.

Enhance Your Business Skills
Building business skills through online courses is a strategic way for small business owners to enhance their financial projection capabilities. Virtual programs make this easy since you can learn at your own pace, fitting education seamlessly into your busy schedule. With business courses, you can level up your accounting, marketing, and operations acumen, ensuring a well-rounded skill set. If you’re aiming to strengthen your financial projections, this deserves a look.

Analyze Business Metrics
Regular analysis of key business metrics like cash flow, profit margins, and overhead costs is essential. These metrics provide insights into your business’s financial health, guiding strategic decision-making. Understanding these financial indicators helps you identify trends, optimize operations, and improve profitability. For instance, a positive cash flow indicates that your business is generating enough revenue to cover expenses and invest in growth opportunities.

Benchmark Against Competitors
Benchmarking your performance against competitors is invaluable. This comparison not only provides perspective on your market position but also highlights areas for improvement. Analyzing how similar businesses manage their finances, respond to industry trends, and attract customers can provide strategic insights that inform your financial projections and business strategies.

Creating realistic financial projections is vital as it not only forecasts the future but also helps in actively molding it to ensure your business’s success. By setting achievable goals, improving your financial knowledge, and keeping abreast of market conditions, you position your business for sustained prosperity. The objective is to do more than just survive; it’s to flourish in today’s competitive market. This approach enables you to steer your business confidently toward long-term achievements.

To elevate your business with expert CPA services and guidance tailored to entrepreneurs, visit Sauder & Stoltzfus today!


Exploring Timeless Success: Insights from Jim Collins’ “Built to Last”

Preface: “Visionary companies display a remarkable ability to continue to grow and change while remaining true to their core ideology.” – Jim Collins, “Built to Last”

Exploring Timeless Success: Insights from Jim Collins’ “Built to Last”

Jim Collins, along with Jerry Porras, authored “Built to Last: Successful Habits of Visionary Companies,” a cornerstone in the realm of business literature since its publication in 1994. The book provides an in-depth analysis of what distinguishes visionary companies from their less enduring counterparts. It isn’t merely a manual of business strategies; it delves into the essence of organizational longevity, dissecting the core principles that enable some companies to thrive over decades, if not centuries.

The Essence of Core Ideology

At the crux of Collins and Porras’s argument is the notion that without a core ideology, a company cannot be visionary. A core ideology comprises the company’s core values and core purpose, forming the foundation upon which the organization builds its legacy. This ideology goes beyond financial performance and market share; it embodies the enduring character of the company.

Core values are the essential and enduring tenets of an organization—a small set of timeless guiding principles that require no external justification. Core purpose, on the other hand, is the organization’s fundamental reason for existence, beyond just making money. It is about making a difference and having a meaningful impact on the world.

The Cultures of Visionary Companies

Visionary companies often exhibit cult-like cultures, characterized by a passionate adherence to the core ideology. This strong cultural identity fosters a profound sense of belonging among employees. It’s a culture where you’re either in or out—there’s little room for those who don’t align with the core values and purpose.

The Misconception About Great Ideas

A significant revelation in “Built to Last” is the notion that you don’t need a great idea to start a great company. Or any idea, for that matter. Visionary companies often begin with a clear sense of purpose and core values rather than a singular, groundbreaking idea. The founders of these companies are usually more focused on building an enduring institution than on a specific product or market.

Take Hewlett-Packard (HP) as an example. HP didn’t start with a revolutionary product idea. Instead, it began with a strong set of values, encapsulated in the “HP Way,” and a commitment to innovation and excellence. Over time, this led to the development of numerous groundbreaking products, but the initial focus was on building a company that could endure and adapt.

Great Companies Produce Great Ideas

While a great idea isn’t necessary to start a great company, visionary companies consistently produce great ideas over their lifetimes. This continuous innovation is a byproduct of their strong core ideology and cult-like culture. These companies foster environments where creativity is nurtured, and innovation is a natural outcome.

3M is a prime example. The company’s culture encourages employees to spend a portion of their time on projects of their own choosing, leading to a steady stream of innovative products. This environment of trust and encouragement is rooted in 3M’s core values and commitment to progress, allowing the company to remain at the forefront of innovation in multiple industries.

Big Hairy Audacious Goals (BHAGs)

Another defining characteristic of visionary companies is their pursuit of Big Hairy Audacious Goals (BHAGs). These goals are bold, daunting, and serve as a catalyst for progress. They are long-term and often appear unattainable, yet they inspire and mobilize the organization towards achieving extraordinary outcomes.

A quintessential example is Boeing’s decision to build the 707, the first American jet airliner. This BHAG was a significant leap of faith at the time but ultimately revolutionized air travel and secured Boeing’s dominance in the aviation industry. BHAGs compel companies to push boundaries and achieve what might initially seem impossible.

Continuous Improvement and Adaptability

“Built to Last” also emphasizes the importance of preserving the core while stimulating progress. Visionary companies excel at maintaining their core values and purpose while continuously seeking ways to improve and adapt to changing environments. This dual approach ensures that while the company remains true to its identity, it also evolves and innovates.

Johnson & Johnson exemplifies this balance. The company’s credo, established in the 1940s, emphasizes a commitment to customers, employees, and communities. This core ideology has remained unchanged, even as the company has expanded and diversified its product offerings, demonstrating adaptability and a continuous drive for improvement.

The Enduring Impact of “Built to Last”

Jim Collins’ “Built to Last” offers timeless lessons for anyone seeking to build or sustain a successful organization. Its insights into the significance of core ideology, the power of cult-like cultures, the misconception of needing a great idea to start, and the relentless pursuit of innovation and BHAGs provide a robust framework for enduring success.

The book’s impact transcends business; it offers a philosophy for building institutions that stand the test of time. By adhering to core values, fostering strong cultures, and continuously striving for improvement, organizations can achieve greatness that endures for generations. “Built to Last” remains a vital resource for leaders and entrepreneurs aiming to create lasting legacies in an ever-changing world.

Deducting Expenses for Use of Your Car

Preface: “The one thing that unites all human beings, regardless of age, gender, religion, economic status, or ethnic background, is that, deep down inside, we all believe that we are above-average drivers.” Dave Barry

Deducting Expenses for Use of Your Car

If you use your car for business purposes, you can deduct car expenses from your business income. Business use includes delivery and rideshare (“gig”) drivers, but does not include drivers who are employees. Be aware that for tax years 2018-2025, the cost of using your car as an employee is no longer allowed as an unreimbursed employee travel expense.

This article will help you determine what costs are considered business use and explain how to figure your deductions.

You can generally use one of the two following methods to figure your deductible vehicle expenses.

        • Standard mileage rate.
        • Actual expenses.

Standard Mileage Rate (SMR)

The SMR method is the simpler of the two methods. The important thing for deducting SMR is to keep track of how many miles you drove for business during the year. You should use a logbook or app to track your business miles. To take the deduction, you just multiply the number of miles by a fixed dollar amount that is set by the IRS each year. For 2023, the standard mileage rate was 65.5 cents per mile.

There are four additional car-related expenses you are allowed to deduct if you use SMR. These are: parking fees and tolls, the interest portions of your car loan payments, and personal property tax assessed on your car by any state or local jurisdiction.

If the car is not used 100% for business, the interest expense and personal property tax must be prorated for the business use percentage of the car. If you use the SMR method, one easy way to figure business use percentage is to take a picture of your odometer every New Year’s morning. This lets you easily compute the total miles driven during the year. If you know your business miles, you may then easily find your business percentage by dividing your business miles by your total miles.

Parking fees and tolls incurred during business trips do not have to be prorated because they are direct business costs.

Parking fees you pay to park your car at your regular place of work are nondeductible because they are considered commuting expenses. Commuter expenses are never deductible, even for the self-employed.
Fines for violations, parking tickets, and other penalty payments are never deductible under any method.

If you want to use SMR, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use either SMR or actual expenses. If you want to use SMR for a car you lease, you must use it for the entire lease period.

Actual Expenses

If you choose to deduct actual expenses, you cannot later choose to use SMR. If you use five or more cars for business at the same time during the year, you must use the actual expenses method.

To deduct actual expenses, you must track all car-related expenditures. This includes all previously mentioned car expenses like parking and tolls, interest, and personal property taxes, and also all other expenses such as gas, oil, tires, repairs, registration, insurance, and garage rent. If the car is not used 100% for business, you must figure a business percentage and prorate the costs.


Another business expense you can and should deduct if you choose actual expenses is depreciation. This allows you in effect to deduct the cost of the car itself over the period of its useful life, typically a five-year period. To figure depreciation expense, you will need to know the cost basis of the car and the date you first used it for business. Calculating the exact amount of depreciation to take each year requires a depreciation calculator or depreciation table.

If the car is not used 100% for business, you will need to prorate the depreciable amount.

EXAMPLE: If you spent $50,000 on a car, placed it service on January 1, and used it 60% for business, one way to take the depreciation would be to deduct $6,000 of depreciation expense each year for a total of five years.

You must decease the cost basis of your car for depreciation.

EXAMPLE: Following the above example, you spent $50,000 on a car and deducted $6,000 of depreciation expense each year for a total of five years. If you then sold the car for $25,000, you would actually owe tax on a $5,000 gain on the sale. This might surprise you, since you sold the car for half of what you originally paid for it, but from the IRS’s point of view, the basis of the car is adjusted down by the amount of depreciation. Therefore, at the time you sold the car, it had an adjusted basis of just $20,000. So you actually sold it for more than its basis.

If you use the SMR, you do not need to calculate depreciation because the annual SMR amount includes an amount due to depreciation. For 2023, this amount was 28 cents per mile.

EXAMPLE: If you use the SMR and drove your car 10,000 miles for business in 2023, you take a SMR deduction of $6,550 (65.5 cents per mile for 1,000 business miles). You do not deduct for depreciation expense because the implied depreciation is included in the SMR deduction. However, you must reduce the basis of the car by $2,800 (28 cents per mile for 1,000 business miles).

What Counts as Business Use of a Car?

Traveling from one workplace to another, or to and from clients or customers, is considered business use.

If you have an office or other regular workplace you commute to, driving between your home and regular place of work is not considered business use, even if you are self-employed.

If you drive between many pickup and delivery sites, most of the miles you drive to, from, and between deliveries and pickups are business miles. One grey area is the drive from your home to your first working location and to your home from your last location. These might be considered commuting, and thus not business miles. However, if you are available for new orders at these times, say, by being active on an app that you get work through as you drive, you may plausibly claim these miles as business miles as well.

Side trips out of your way for personal errands should never be counted as business miles.

All documentation to prove your business miles and other vehicle expenses should be kept for three years after the due date of the return.


Estate Planning and Power of Attorney: Managing Gift Giving

Preface: “The best inheritance a parent can give his children is a few minutes of his time each day. “– Orlando Aloysius Battista

Estate Planning and Power of Attorney: Managing Gift Giving

As people live longer, dementia and other mental disabilities become more common, posing challenges in estate planning. To manage this, elderly individuals often appoint an attorney-in-fact through a power of attorney (POA) to handle their financial and medical affairs. Typically, the attorney-in-fact is an adult child, which can lead to questions about the appropriateness of gift giving, especially when the attorney-in-fact is a recipient of the gifts.

IRS Ruling on Gift Giving

In a private letter ruling, the IRS allowed the annual gift tax exclusion amount ($18,000 for 2024) in cases where an attorney-in-fact made gifts to herself and her children. This can help reduce the taxable estate by the exclusion amount for each gift. However, the IRS requires certain conditions to be met, which may not be common for all taxpayers.

Example Scenario

A mother executed a durable power of attorney, naming her spouse as the agent and her daughter as the alternate. After the spouse died, the daughter, using the POA, created two trusts on her mother’s behalf:

      • A qualified personal residence trust that would transfer the residence to the daughter after the trust term.
      • A trust for the benefit of the daughter’s children.

These transfers were reported on gift tax returns, and the applicable tax was paid.

The POA gave the daughter broad authority to perform any act her mother could do if personally present. The daughter was also the sole beneficiary of her mother’s estate. The mother had a history of making substantial gifts, exceeding the annual exclusion amount. When she died, her estate was much larger than the total value of the gifts made by her daughter.

IRS Criteria for Gift Authorization

The IRS’s decision on whether the gifts were complete for tax purposes depended on whether a state court would likely find the gifts authorized under the POA. The IRS considered the following:

Specific Authorization: Does the POA specifically authorize gift giving? If not, proving authorization is more challenging.

Beneficiaries’ Identity: Are the gift recipients also beneficiaries under the decedent’s will? This suggests the decedent’s intent to authorize such gifts.

Sufficient Assets: Did the person who executed the POA have enough assets to cover living expenses and avoid economic disadvantage after the gifts?

Previous Gift-Giving History: Was there a history of gift giving that aligns with the gifts made under the POA? Consistent past gift giving supports authorization.

Avoiding Tax Litigation

To avoid tax litigation, it’s beneficial to draft a POA that explicitly includes the power to make gifts and reflects the grantor’s intent to continue a gift-giving plan if appropriate. This is particularly useful for estates near or within the taxable range. However, if the grantor is less concerned about maximizing tax savings, as may be the case when the POA is granted, and the estate is not large, this situation may still attract IRS scrutiny.


Clear and specific provisions in a power of attorney help ensure that gift giving is authorized and consistent with the grantor’s intent, potentially reducing estate tax and avoiding IRS issues.

When is a Partnership IRS Form 1065 Filing Required?

Preface: “Great things in business are never done by one person; they’re done by a team of people.” – Steve Jobs

When is a Partnership IRS Form 1065 Filing Required?

Understanding when to file IRS Form 1065 is crucial for anyone involved in a partnership. The Form 1065, also known as the U.S. Return of Partnership Income, is the form that partnerships use to report their income, deductions, gains, losses, and other financial details to the Internal Revenue Service (IRS). Knowing the requirements and deadlines for this form helps ensure compliance with federal tax laws and avoids potential penalties. Here’s a detailed look at when a partnership is required to file Form 1065.

What is a Partnership?

A partnership is a business entity where two or more people join together to carry on a trade or business. Each partner contributes money, property, labor, or skills and, in return, shares in the profits and losses of the business. There are different types of partnerships, including:

    • General Partnerships (GP)
    • Limited Partnerships (LP)
    • Limited Liability Partnerships (LLP)
    • Limited Liability Companies (LLC) treated as partnerships for tax purposes

Regardless of the type, these partnerships are considered pass-through entities for tax purposes, meaning they do not pay income tax themselves. Instead, income, deductions, credits, and other tax items pass through to the individual partners, who report these items on their personal tax returns.

When is Form 1065 Required?

A partnership must file Form 1065 if it meets the following criteria:

      1. It is a Domestic Partnership: Any partnership formed in the United States must file Form 1065. This includes general partnerships, limited partnerships, and limited liability partnerships.
      2. It is a Foreign Partnership Engaged in Trade or Business in the U.S.: Foreign partnerships that are engaged in trade or business within the United States are also required to file Form 1065.
      3. It has Gross Income or Deductions to Report: Any partnership that has income or expenses to report must file Form 1065, even if it has no taxable income. This ensures that all financial activities are documented and reported to the IRS.
      4. It Meets Certain Other Specific Criteria: Certain partnerships, such as those with foreign partners or those involved in farming or other specific industries, may have additional filing requirements. For example, partnerships with foreign partners may need to file additional forms and schedules along with Form 1065.

Exceptions to Filing Form 1065

While the general rule is that all partnerships must file Form 1065, there are exceptions:

      1. Qualified Joint Ventures: A qualified joint venture conducted by a married couple who file a joint return can elect not to be treated as a partnership for federal tax purposes. Instead, each spouse can report their respective share of income and expenses on their individual tax returns, thus avoiding the need to file Form 1065.
      2. Disregarded Entities: A single-member LLC that is treated as a disregarded entity for tax purposes does not need to file Form 1065. Instead, the sole owner reports the income and expenses on their individual tax return.
      3. Electing Large Partnerships: Large partnerships, those with 100 or more partners, may elect to file Form 1065-B, U.S. Return of Income for Electing Large Partnerships, instead of the standard Form 1065.

Filing Deadlines and Extensions

The deadline for filing Form 1065 is the 15th day of the third month following the end of the partnership’s tax year. For most partnerships operating on a calendar year, this means the due date is March 15. If the due date falls on a weekend or a legal holiday, the filing deadline is the next business day.

Partnerships can request a six-month extension by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. This extension moves the filing deadline to September 15 for calendar-year partnerships.

Consequences of Failing to File

Failing to file Form 1065 on time can result in significant penalties. The IRS imposes a penalty for each month or part of a month the return is late, multiplied by the number of partners in the partnership. This penalty can add up quickly, making timely filing essential.


Filing IRS Form 1065 is a crucial requirement for partnerships to report their financial activities accurately. Understanding when and why this form is required helps ensure compliance with tax laws and avoids unnecessary penalties. Partnerships should stay informed about their filing obligations and deadlines to maintain good standing with the IRS and ensure smooth business operations. Whether a partnership is domestic or foreign, has income or deductions to report, or falls under specific exceptions, staying on top of these requirements is essential for successful and compliant business management.

Mastering the Statement of Cash Flows: A Guide to Financial Clarity

Preface: “Never take your eyes off the cash flow because it’s the lifeblood of business.” – Sir Richard Branson

Mastering the Statement of Cash Flows: A Guide to Financial Clarity

In the realm of financial reporting, the statement of cash flows stands as a beacon of transparency, offering a clear window into a company’s cash inflows and outflows. Often hailed as the most revealing of all financial statements, mastering the intricacies of the statement of cash flows is essential for anyone seeking a comprehensive understanding of a company’s financial health. Join us as we unravel the nuances of this critical document, exploring its key sections like a seasoned accountant, while also delving into the indispensable role of expert accounting in ensuring accuracy and reliability.

Deciphering Operating Cash Flows:

Uses and Sources: Operating cash flows represent the lifeblood of a company, reflecting the cash generated or utilized by its core business activities. Sources of operating cash flows include revenue from sales, collections from customers, and interest received, among others. Conversely, uses of operating cash flows encompass payments to suppliers, employee wages, taxes, and operating expenses. A positive operating cash flow indicates that a company is generating sufficient cash from its operations to sustain and grow its business.

Identifying Major Changes: Analyzing changes in operating cash flows unveils valuable insights into a company’s financial performance and operational efficiency. Significant fluctuations may signal shifts in sales volumes, changes in collection or payment terms, shifts in inventory management practices, or alterations in cost structures. Understanding these changes allows stakeholders to assess the underlying drivers of cash flow variability and make informed decisions regarding the company’s future prospects.

Navigating Investing Activities:

Capital Expenditures and Investments: Investing activities encompass cash flows related to the acquisition or disposal of long-term assets, such as property, plant, and equipment (PP&E), as well as investments in securities or other businesses. Cash outflows from investing activities typically arise from capital expenditures for new equipment or facilities, acquisitions of other companies, or purchases of marketable securities. Conversely, cash inflows result from the sale of assets or securities.

Understanding Financing Activities:

Debt and Equity Transactions: Financing activities revolve around cash flows associated with raising capital and repaying debt. Cash inflows from financing activities include proceeds from issuing stocks or bonds, as well as loans obtained from lenders. Conversely, cash outflows encompass repayments of debt principal, dividends paid to shareholders, and stock repurchases. Analyzing financing activities provides insights into a company’s capital structure, leverage, and dividend policy.

The Role of Skilled Accountants:

In the intricate tapestry of financial reporting, the expertise of skilled accountants shines brightly. Crafting accurate and reliable cash flow statements requires a deep understanding of accounting principles, regulatory requirements, and financial analysis techniques. Accountants play a pivotal role in ensuring that cash flow statements faithfully reflect a company’s cash-generating activities, without bias or manipulation.

Importance and Integrity of Cash Flow Statements:

Unlike other financial statements, cash flow statements provide a direct and unambiguous depiction of a company’s cash position and liquidity. They serve as a vital tool for investors, creditors, and management in assessing a company’s ability to generate cash, meet financial obligations, and pursue growth opportunities. Fabricating cash flow statements to deceive stakeholders is not only unethical but also illegal, as regulators and auditors rigorously scrutinize these documents to ensure their accuracy and integrity.


Reading a statement of cash flows with the acuity of an accountant offers a wealth of insights into a company’s financial performance, operational efficiency, and strategic direction. By dissecting operating cash flows, investing activities, and financing activities, stakeholders gain a holistic understanding of a company’s cash-generating activities and capital allocation decisions. Yet, amidst the complexities of financial reporting, the expertise of skilled accountants remains indispensable, ensuring accuracy, transparency, and compliance with accounting standards. In the dynamic landscape of business, the statement of cash flows stands as a beacon of financial clarity, guiding stakeholders toward informed decisions and sustainable growth.

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Mastering the Profit and Loss Statement: An Accountant’s Guide to Financial Insight

Preface: “The wise man learns more from his losses than from his profits.”             – William Hazlitt

Mastering the Profit and Loss Statement: An Accountant’s Guide to Financial Insight

In the world of finance, few documents wield as much power and significance as the profit and loss statement (P&L). Often referred to as the income statement, this financial statement provides a comprehensive overview of a company’s revenue, expenses, and ultimately, its profitability. Join us as we delve into the intricacies of the P&L, unraveling its key components like a seasoned accountant, while exploring the critical role of expert financial management in maintaining accuracy and clarity.

Unveiling Top-Line Sales:

Revenue: At the pinnacle of the P&L sits the crown jewel of any business: revenue. This top-line figure encapsulates the total income generated from the sale of goods or services. Whether derived from product sales, service fees, or other sources, revenue serves as the lifeblood of a company, fueling growth and sustaining operations.

Peering Into Cost of Goods Sold (COGS):

Cost of Goods Sold: Beneath the surface of revenue lies the realm of cost of goods sold (COGS), representing the direct expenses incurred in producing or acquiring the goods sold by a company. Raw materials, labor, and manufacturing overhead converge here, shaping the gross margin and illuminating the efficiency of production processes.

Managing General and Overhead Expenses:

Operating Expenses: Beyond the realm of COGS sprawl the general and overhead expenses, encompassing a myriad of operational costs essential to sustaining day-to-day activities. Rent, utilities, salaries, marketing expenses, and administrative costs all find their place here, exerting their influence on the bottom line.

Exploring Other Income and Expenses:

Non-Operating Items: Amidst the ebb and flow of operational activities, other income and expenses emerge as notable players in the financial landscape. Interest income, gains or losses from asset sales, and extraordinary items populate this category, offering glimpses into the broader financial ecosystem beyond core business operations.

Calculating Net Profit:

Bottom Line: At the culmination of this financial journey lies the ultimate litmus test of success: net profit. This figure represents the residual income remaining after all expenses, including taxes and interest, have been deducted from revenue. A positive net profit signifies profitability, while a negative figure signals financial distress and calls for strategic intervention.

Leveraging Horizontal and Vertical Financial Analysis:

Horizontal Analysis: Horizontal analysis involves the comparison of financial data across multiple periods, allowing stakeholders to identify trends, patterns, and deviations over time. By scrutinizing changes in revenue, expenses, and profitability ratios from one period to another, businesses can glean insights into their performance trajectory and adapt their strategies accordingly.

Vertical Analysis: In contrast, vertical analysis involves the comparison of individual line items within a single period, expressed as percentages of a base figure (usually total revenue or total expenses). This technique facilitates the assessment of the relative significance of each expense category or revenue stream, highlighting areas of strength or weakness within the P&L structure.

The Indispensable Role of Expert Accounting:

Amidst the intricate web of financial data and analysis, the need for expert accounting guidance becomes abundantly clear. An accountant’s proficiency in interpreting financial statements, implementing accounting standards, and ensuring compliance fosters accuracy and transparency in P&L reporting. From reconciling transactions to forecasting future performance, accountants serve as guardians of financial integrity, guiding businesses towards sustainable growth and profitability.


Reading a profit and loss statement with the precision of an accountant unlocks a wealth of insights into a company’s revenue streams, expense management, and overall financial performance. By dissecting revenue sources, cost structures, and profitability metrics, stakeholders gain an expert understanding of a company’s operational efficiency and strategic direction. Yet, amidst the complexities of financial analysis, the guiding hand of an experienced accountant remains indispensable, ensuring accuracy, compliance, and trust in P&L reporting. In the dynamic landscape of business, the accountant’s expertise shines as a beacon of financial acumen, illuminating pathways to prosperity and sustainable growth.

We hope you’re enjoying our series on Mastering Accounting Insights. If you missed it, last week we looked at Mastering the Balance Sheet. Please join us next week as we look into the mastering Cash Flows.

Mastering the Balance Sheet: An Accountant’s Guide to Financial Insight

Preface: “Legacy accounting: Will you have been an asset or a liability on the world’s balance sheet?” ― Ryan Lilly

Mastering the Balance Sheet: An Accountant’s Guide to Financial Insight

Unlocking the mysteries of a balance sheet requires more than just a passing glance. It demands a trained eye, attention to detail, and an understanding of the intricate artwork between assets, liabilities, and equity. In this guide, we’ll delve deep into the heart of the balance sheet, unraveling its key components like a seasoned accountant, while also exploring the indispensable role of expert accounting in maintaining accuracy and clarity.

Navigating Current Assets and Liabilities:

Current Assets: Current assets are the pulse of a company’s liquidity, representing resources readily convertible to cash within a year. Cash, accounts receivable, inventory, and short-term investments populate this category, offering insights into a company’s ability to meet immediate obligations and fuel day-to-day operations.

Current Liabilities: Conversely, current liabilities encompass obligations due within a year, such as accounts payable, short-term loans, and accrued expenses. The interplay between current assets and liabilities reveals a company’s short-term financial health, with the current ratio serving as a litmus test for liquidity.

Deciphering Long-Term Assets and Liabilities:

Long-Term Assets: Long-term assets paint a picture of a company’s future prospects, comprising investments expected to yield returns beyond the next fiscal year. Property, plant, and equipment (PP&E), intangible assets, and long-term investments fall into this category, reflecting a company’s commitment to growth and sustainability.

Long-Term Liabilities: Meanwhile, long-term liabilities extend beyond the horizon of immediate concern, encompassing debts and obligations payable over an extended period. Bonds payable, long-term loans, and lease obligations feature prominently here, shaping the balance between debt and equity and influencing a company’s risk profile.

Unveiling Accumulated Depreciation and Equity:

Accumulated Depreciation: Accumulated depreciation serves as a silent observer, quietly chipping away at the value of fixed assets over time. This contra account acknowledges the inevitable wear and tear endured by property, equipment, and machinery, ensuring accurate asset valuation and accounting for depreciation expenses.

Equity and Capital Accounts: Equity stands as the beacon of a company’s financial worth, embodying the residual interest after liabilities have been settled. Common stock, retained earnings, and additional paid-in capital comprise its foundational elements, reflecting shareholder ownership and the company’s reinvestment capacity.

The Impact of Distributions on Equity:

Distributions, whether in the form of dividends or share buybacks, wield significant influence over equity. While rewarding shareholders, they deplete retained earnings, diminishing the cushion of financial strength that safeguards against uncertainties. Striking a balance between rewarding investors and preserving financial stability is essential for sustainable growth and long-term prosperity.

The Crucial Role of Expert Accounting:

Amidst the intricate web of transactions and balances, the need for expert accounting guidance becomes glaringly evident. An accountant’s expertise in navigating complex financial landscapes, interpreting regulatory frameworks, and ensuring compliance fosters accuracy and transparency in balance sheet reporting. From reconciling accounts to implementing internal controls, accountants serve as custodians of financial integrity, safeguarding against errors, fraud, and misstatements.


Reading a balance sheet with an accountant’s precision unveils a wealth of insights into a company’s financial standing, operational efficiency, and strategic direction. By analyzing current assets, liabilities, long-term investments, accumulated depreciation, and equity, stakeholders gain a holistic understanding of a company’s fiscal health and viability. Yet, amidst the labyrinth of numbers and figures, the guiding hand of an experienced accountant remains indispensable, ensuring accuracy, compliance, and trust in financial reporting. In the ever-changing  landscape of business, the accountant’s expertise shines as a beacon of financial acumen, illuminating pathways to prosperity and sustainable growth.

Welcome to the inaugural installment of our new blog series, “Mastering Financial Tools”! We aim for these posts to offer our clients deeper insights into Sauder & Stoltzfus, LLC’s approach to analyzing financial statements and more. Join us next week for in depth information about Profit & Loss statements.

Profit and Protection: The Essential Guide to Small Business Financial Health

Preface: “When you have a safety net, it allows you to take risks.”~ Kunal Nayyar

Profit and Protection: The Essential Guide to Small Business Financial Health

Navigating the complexities of small business finance requires a strategic approach to ensure stability and growth. This Sauder & Stoltzfus LLC guide offers vital steps to construct a resilient financial safety net for your small business, a cornerstone for thriving in today’s competitive marketplace.

Creating Comprehensive Cash Flow Projections
Creating a detailed cash flow projection is paramount for financial management. This forecasting tool enables you to predict revenues and expenses accurately. A robust projection assists in informed decision-making, providing a clear view of your business’s fiscal health and aiding in avoiding potential financial pitfalls. Accounting software like NetSuite can streamline the process of making financial projections by utilizing real-time data to forecast revenue, expenses, and profitability trends.

Digital Efficiency in Record-Keeping
Maintaining an organized archive of your business and financial records is crucial, especially when applying for government grants or seeking to maximize tax deductions. In this endeavor, Adobe Acrobat’s free PDF tools emerge as a valuable asset, simplifying document management. A particularly useful feature is converting PDF to Word, allowing for easy updates and edits to your documents. This capability ensures that your records are not only accessible but also adaptable to your ever-evolving business needs.

Rigorous Financial Statement Review
Regular scrutiny of your financial statements is a critical practice. It involves monitoring income, expenses, and overall financial health. This ongoing review helps in detecting early signs of financial stress, allowing for timely interventions. Keeping a close eye on these statements ensures you stay aligned with your business goals and maintain a healthy financial trajectory.

Separating Personal and Business Finances
Drawing a distinct line between personal and business finances is critical for clear financial tracking and management. Separate banking accounts and financial records help in maintaining an organized approach to business finances. This separation simplifies tax filing and aids in adhering to regulatory requirements, ensuring financial transparency and accountability.

Maintaining a High Credit Score
Understanding the impact of your credit score on business financing options is essential. A healthy credit score, preferably above 740, is crucial for securing loans with favorable terms. It influences lenders’ decisions regarding loan approvals and interest rates. Maintaining a strong credit score is vital for accessing financial resources to support your business’s growth.

Leasing vs. Buying: Making Smart Equipment Choices
Deciding whether to lease or purchase equipment is a significant financial decision. Leasing offers the advantage of lower initial costs and flexibility, while buying leads to long-term ownership and potential asset accumulation. Evaluating your business’s current financial position and future needs is crucial in making the choice that best aligns with your strategic objectives.

Choosing an Optimal Business Structure
Selecting the appropriate business structure, like a limited liability company (LLC), is crucial. An LLC provides benefits such as limited liability protection, tax advantages, and operational flexibility. When forming an LLC, consider an affordable formation service. Prior to selecting a formation service, it’s crucial to peruse various reviews. This will assist you in identifying the most suitable and highly rated service for your specific needs.

Leveraging Expert Financial Guidance
Partnering with a financial advisor or accountant is invaluable in managing complex business finances. Their expertise in areas such as financial planning, tax strategy, and compliance with financial regulations can be instrumental in steering your business toward financial stability and growth.

Establishing a robust financial safety net for your small business is a strategic process that demands attention and careful planning. Implementing key steps like maintaining your credit score, forming an LLC, and digitizing essential documents ensures the financial health of your business, setting a solid foundation for sustainable growth and success. In the ever-changing business landscape, being financially prepared and proactive is the key to navigating challenges and seizing opportunities.

Elevate your business with expert CPA services tailored for entrepreneurs. Let Sauder & Stoltzfus LLC guide you toward achieving your business goals with integrity and excellence.