Financial Clarity: A Key to Thriving Business Operations

By Matthew Everson, Fractional Controller, Blackline Solutions LLC

When starting a business, we plan what products or services to sell, how to acquire customers, what inputs are needed and how to meet our customers’ needs. We often think through potential costs and how to price our products and services. Yet many times, we overlook an important missing link: how to keep a clean set of books. As an old saying goes, “If you don’t know your numbers, you don’t know your business.”

Your books should provide three important financial statements: an income statement (also known as profit and loss/P&L), a balance sheet and a cash flow statement. Each of these presents different information and has different uses, but each offers an important view into the health and direction of your business.

The income statement summarizes all income and expenses the business incurs over a period of time and provides a net income/profit (or loss) as the difference between total income and total expenses. This statement includes things like revenue from sales or services, costs for supplies or materials, payroll and labor expenses, payments to and credits from vendors, and interest income or payments.

An accurate income statement will show both the business gross margin (after cost of goods or services sold, or COGS) and net margin (after all operating expenses). When analyzed over time, the income statement will reveal whether the business is growing or contracting. Likewise, it is one of the main documents used to determine how much may be owed in taxes.

Sounds simple, right? However, the challenge comes in getting the right things recorded, in the right places, on the income statement. For instance, the purchase of a business vehicle almost always is not an expense but a transfer of cash to a fixed asset on the balance sheet. Likewise, putting the appropriate expenses in COGS is vital to understanding the profitability of the business. Without having an accurate gross margin, it is very difficult to determine how growth in customers or sales will impact the bottom line.

The balance sheet lists all the assets, liabilities and equity a business holds. Assets include balances of checking and savings accounts; receivables like monies owed by customers; prepaid expenses; fixed assets such as vehicles, buildings and large pieces of equipment; and long-term loans owed by others to the business. Liabilities include credit card balances, credit lines, payables like vendor invoices, payroll liabilities like benefits and taxes owed, and longterm loans. Equity includes partner contributions to or distributions from the business, as well as retained earnings over the course of business operations. adds in balance sheet items, such as asset purchases or principal payments on loans, to show the net cash change. Examples of noncash transactions include unpaid invoices or depreciation and amortization expenses.

Many businesses ignore their balance sheet to focus on the income statement, but valuable information can be found on the balance sheet as well. If accounts receivable is growing, for instance, that could represent a collections or payment issue and almost always results in a reduction in cash flow for the business. If liabilities like credit cards or credit lines increase consistently, this could be another sign that the business has a cash flow problem. Consistent unpaid payroll liabilities need to be investigated, due to the tax and legal requirements surrounding them.

The cash flow statement provides insight into where the cash in a business moves. The more complex a business becomes, with significant noncash entries on the income statement, the more helpful a cash flow statement can be in determining where cash is going.

All three of these statements are only as good as the information and numbers booked, however. If a business does not have accurate records of

The cash flow statement shows the movements of cash into, through and out of the business, combining much of the information on the income statement

Education: January 15-17 at the Sheraton Greensboro at Four Seasons

Marketplace: January 18-19 at the Greensboro Coliseum Special Events Center

Get ready for Green & Growin’ 24, where thousands of horticulture and landscape experts will unite for one of the most sought-after green industry conferences in the Southeast. You’ll have access to a top-notch education program packed with plenty of continuing education units (CEUs), plus a trade show marketplace representing all aspects of the industry. And don’t forget about the networking opportunities — get ready to mingle and have a great time! Of course, all of this comes with a generous helping of good ol’ Southern hospitality.

The Green & Growin’ 24 Education Conference, January 15-17, will feature an impressive lineup of specialty workshops, certification courses and general education sessions. Expanding on our landscape, irrigation and pesticide focus, we are also integrating classes that specifically address the needs of nurseries and growers, who are such a vital part of our industry. This program is packed with CEUs for green industry professionals looking to expand their knowledge and earn credits for licenses and certifications. All education sessions will take place at the Sheraton Greensboro at Four Seasons.

Green & Growin’ 24 keynote speakers will present from 12:00 noon - 12:50 PM. Lunch will be provided on a first-come, firstserved basis beginning at 11:30 AM. Please remember to scan your badge into the keynote presentation, even if you are not joining us for lunch.

At the Green & Growin’ 24 Marketplace, January 18-19, you’ll have a unique chance to check out top products from a wide array of industry producers and suppliers, have meaningful talks with representatives, and place orders for the year ahead. With more than 325 exhibiting companies, Green & Growin’ has gained a reputation as one of the most coveted events in the green industry, setting the bar for product showcases, networking opportunities and business deals. The Marketplace will take place at the Greensboro Coliseum Special Events Center.

North Carolina’s green industry is known for a strong sense of teamwork and camaraderie among its members, from family-owned farms to larger businesses. Throughout the week, Green & Growin’ offers various opportunities to connect and build valuable relationships with industry peers. Be sure to mark your calendar for the show’s highlight event, the second annual President’s Reception, on Thursday, January 18, at 8:00 PM. All attendees of the Education and Marketplace events are welcome to join the reception, which will be hosted by NCNLA’s 2024 president, Ariel Montanez. The evening will offer desserts, a cash bar, a cornhole tournament and more!

Education & Marketplace amenities

Tuesday: Leslie Halleck: Professional Plant Enthusiast, Creator, Artist, Speaker and Writer

Take Back Control: The Importance of Driving Trends

Instead of Chasing Them

Wednesday: Jeffrey Scott: Investor, Entrepreneur, Landscape Industry Expert, Speaker and Business Consultant

Every Business Needs a Number 2 coffee • lunch afternoon snacks

Thanks to our sponsors, we can provide complimentary food and beverage — so you can spend more time on the floor. (available daily while supplies last).