cash flow vs profit.

[big head]

I am researching business's hoping to buy soon. Most are listed by
cash flow. How does that relate to profit? Is owners compensation
part of either? one of the business's I'm am looking at shows owners
comp of 80k and cash flow of 80k, but when looking at tax returns I
dont see any evidence of the owners getting anything. Thanks

[Wayne Lundberg]

Post by big head
I am researching business's hoping to buy soon. Most are listed by
cash flow. How does that relate to profit? Is owners compensation
part of either? one of the business's I'm am looking at shows owners
comp of 80k and cash flow of 80k, but when looking at tax returns I
dont see any evidence of the owners getting anything. Thanks

This will sound glib and offhand, but it's the basis for any serious
business manager. Keep it simple. Know on a day to day basis what is your
income, what are your actual expenses such as labor and materials, and what
is left over. If you have enough left over to pay rent and interest on your
loan you are in good shape. If you don't, you had better do something NOW to
bring in more sales, more revenue or cut costs. Traditional accounting will
not do this for you. Traditional accounting is for tax purposes and the
information you get will be too late to take corrective action. I don't care
if you are IBM or StreetCorner T Shirts...

Wayne
www.pueblaprotocol.com - free online courses in English and Spanish on
entrepreneurship fully funded by the California Community Colleges.

[Robert Anderson]

Post by Wayne Lundberg

Post by big head
I am researching business's hoping to buy soon. Most are listed by
cash flow. How does that relate to profit? Is owners compensation
part of either? one of the business's I'm am looking at shows owners
comp of 80k and cash flow of 80k, but when looking at tax returns I
dont see any evidence of the owners getting anything. Thanks

This will sound glib and offhand, but it's the basis for any serious
business manager. Keep it simple. Know on a day to day basis what is your
income, what are your actual expenses such as labor and materials, and what
is left over. If you have enough left over to pay rent and interest on your
loan you are in good shape. If you don't, you had better do something NOW to
bring in more sales, more revenue or cut costs. Traditional accounting will
not do this for you. Traditional accounting is for tax purposes and the
information you get will be too late to take corrective action. I don't care
if you are IBM or StreetCorner T Shirts...

Then what is the alternative to traditional accounting?

[Wayne Lundberg]

"Robert Anderson" <***@nospams.com> wrote in message news:***@news.supernews.com...
..>

Post by Robert Anderson
Then what is the alternative to traditional accounting?

..===snip===

For management decisions just know your sales for the week, all expenses
including labor and materials, and how much is left over to pay mortgage,
loans, buy a new tool, make changes, etc. The kind of accounting you would
use is you were a street vendor. KISS

Wayne

[Dan]

Post by Robert Anderson
Then what is the alternative to traditional accounting?

Activity-Based Cost Accounting. A good book to learn about it is
"Activity-Based Costing; Making It Work for Small and Mid-sized Companies".

[big head]

Post by Wayne Lundberg

Post by big head
I am researching business's hoping to buy soon. Most are listed by
cash flow. How does that relate to profit? Is owners compensation
part of either? one of the business's I'm am looking at shows owners
comp of 80k and cash flow of 80k, but when looking at tax returns I
dont see any evidence of the owners getting anything. Thanks

This will sound glib and offhand, but it's the basis for any serious
business manager. Keep it simple. Know on a day to day basis what is your
income, what are your actual expenses such as labor and materials, and what
is left over. If you have enough left over to pay rent and interest on your
loan you are in good shape. If you don't, you had better do something NOW to
bring in more sales, more revenue or cut costs. Traditional accounting will
not do this for you. Traditional accounting is for tax purposes and the
information you get will be too late to take corrective action. I don't care
if you are IBM or StreetCorner T Shirts...
Wayne
www.pueblaprotocol.com - free online courses in English and Spanish on
entrepreneurship fully funded by the California Community Colleges.

Dont you think there should be something in there compensating the
owner? Thats my question. How can a business claim to compensate the
owner 80k, but on the tax return I see no evidence of it.

[m***@jach.hawaii.edu]

Post by big head
Dont you think there should be something in there compensating the
owner? Thats my question. How can a business claim to compensate the
owner 80k, but on the tax return I see no evidence of it.

but it depends on how the business is organized where you find it.
E.g. on an 1120S (S corp) it's in line 21 (and then depends on
the number of shareholders what everyone gets out), whereas on
a family owned farm it's on schedule F at the bottom.
Of course you could have to look into payroll stuff to find it in
somewhat bigger places because owners of those might actually
pay themselves a wages (of course some people might just employ
themselves even if they are the sole owner.)

You only mention 'tax return', not exactly which forms you're
looking at (I may be an astronomer by education and a software
engineer by job title, but I've been told that I know a fair
bit about taxes too. It's enough for ours, including the S-corp).

Maren
Tropical seeds - Job's Tears Jewelry - Plants & Lilikoi
http://www.jach.hawaii.edu/~maren/palms_etc/