Edmonton Business Consultant | Components of Your Financial Statements

All right. Thrive nation. Welcome back to another edition here of a are interrogation session with Mr Josh Sperl, the Canadian Accounting Guru. And we’re talking today about the components of your Edmonton Business Consultant statements. Now, before anybody out there goes to sleep or maybe looks for a narcotic to a sue, the pain of listening to a podcast about accounting, I want everybody to out to wake up and to recognize something. You’re going to end up living in a van down by the river if you don’t understand how to look at financial statements. And so Jason, uh, you manage the elephant in the room, men’s grooming lounge chain, and I’m sure you’ve never met people like this, but have you ever in an alternative parallel universe, ever met somebody that has a job, maybe even working, not for the elephant in the room, but a parallel company in another, you know, world who isn’t aware of how their pay stub works and isn’t aware of where their money’s going and isn’t aware of taxes. Have you ever seen this kind of scenario unfold? Any parallel universe?

Yeah, in, in multiple, like theoretical alternate dimensions. I’ve seen that happen multiple times.

Now, Josh, you are an accountant from north of the border at Canadian CPA. Don’t you know, and so when you’re up there working with business owners, is it common that you’ll sit down with a business owner who has no idea how to read their financial statements previous to talking to you?

Yeah, I think unfortunately that’s something that a, yeah, it happens all too often.

Okay. So what I’m going to do is I’m going to try to weave in at least three to four stereotypical Canadian references a while asking you sincere accounting questions. Okay. So what are the three main question components of your Edmonton Business Consultant statements?

Well, I think that the three main components of your Edmonton Business Consultant statements are really your balance sheet. Okay. Your statement of retained earnings and then your income statement. Okay. Your balance sheet, your statement of what statement of retained earnings, retained earnings and what was the next one? Your income statement or people call it profit and loss. Your profit and loss. Got It. Okay. Your profit and loss taking notes here. So Justin Bieber can read it later. Okay. So talk to me about your balance sheet. What is the balance sheet? So you need to think of your balance sheet as if someone hit the stop button at a moment in time. So if someone hit a stop button at the moment in time, these are the assets in the liabilities. So if you have a December 31st year end and someone hits a stop button, how much is in your bank account at that moment on December 31 how much are you, is your accounts receivable?

How much do you owe other people? Okay, now your Edmonton Business Consultant of retained earnings, what is that all about? So you can think of your statement of retained earnings are the profits that have been saved in your, so once income goes into your business, it’s saved there. Unless you take a dividend to take it out, it’s still should be there in the statement. Retained earnings is really just counting the cumulative effects of the earnings that have been saved in the company over time. So talk to me about this, this concept of the balance sheet. Why? Why is the balance sheet from your perspective the most important of these three components? So you bring entrepreneurs in and they’re really excited to see their income statement. They want to see how they did that I do well or did I not do well? And I really caution people, any business owner, if they’re reviewing their income statement and they have not yet looked at their balance sheet, chances are there’s probably a mistake if no one’s reviewing that balance sheet.

The balance sheet is where you’re going to find where those mistakes are. You know, does that cash balance look right? Am I really owed that amount amount of money? Is that what I really have to pay other people? If you have not looked at that balance sheet prior to looking at that income statement, you might as well be looking at someone else’s income statements sometimes. So what would you say to the entrepreneurs out there who look at the income statement without looking at the balance sheet? Don’t you know, hey, I, I would, I would tell them that, you know, you really have to take the time to look at the balance sheet first because you don’t want to be making business decisions on an income statement and not have any comfort level with that balance sheet because you really could in all essence be making decisions on incorrect numbers.

And there’s a little bit of intimidation because the income statement is maybe slightly more intuitive, but really you have to looking, you know, down a balance sheet with an accountant a few times. You’re going to be able to start picking out some of the items yourself as well. Um, so you really need to start with that balance sheet, you know, have a comfort with that first and then get into the income statement and make sure you’re making decisions off a reliable income statement. What kind of items should I be looking for on my income statement, my friend. And by the way, we’re going to have some tough American accounting questions for you coming in hot from Mr Andrew from the thrive time show hand, Mr Jason. So you get yourself, you can, you can already answer. We’re giving you the easy Canadian question. Softball questions.

If you’re gonna get a tough American guns and gold, a very libertarian, very tough American questions in just a moment here. What are the items on the income statement? So the items on the income statement are, you know, you’re starting with the revenue of your Edmonton Business Consultant. Um, so what revenue has come in before any expenses are paid, what revenue has come in, you know, moving down. Then you’re going to have the cost to sales, the direct cost of sales. Now these are the things that go, go up. They increase as you bring on more customers. You know, you have to have more staff. For example, you have direct costs of labor, you have direct supplies. If you’re in construction, then moving down, you have your general expenses. Now these are expenses that that generally can’t be avoided. No matter how much revenue you have and whether you have, you know, you’re hitting your targets or you’re completely below your targets.

Things like your Edmonton Business Consultant and administrative staff, that’ll just stay there. Those are your Edmonton Business Consultant expenses. So looking up its revenue, then direct costs of sales than general expenses. Then moving down, you could have other items at the bottom. So what is the, why is the statement of retained earnings important for anybody out there? So, you know, I don’t, I don’t know why I need that. I, I get what it is. Why do I need it? So your statement of retained earnings really says what position, you know, how much profit you save in that business over time. So it’s really a good indicator of, you know, how you’ve been doing since the inception of your business. So, um, talk to me about this. How many pages should each of these statements be? You’ve talked about, you know, making sure you have a balance sheet, the statement of retained earnings, the your profit and loss.

How many pages should each of these be? This is the simplest answer I’m going to give today. One page, one page, one page each. Oh, nice. Nice. Okay. Okay. So I have some tough questions and I’m going to let Jason Interrogate you with, with the one tough, hard hitting American questions. So here’s my, here’s my, uh, for one of my first questions for you. Suppose that I’m down here in America listening to this podcast, uh, while, uh, you know, I’m shining my gun, cleaning my gun. I am, uh, counting my gold listening to uh, uh, kid rock while I’m thinking about how great our military is. You know what I mean? I’m thinking about that and I’m, I’m kind of just passionate about how good our Olympic team is. I’m just thinking about that and I’m trying to plant, I’m going here. I am getting advice from what appears to be a Canadian.

He was superior knowledge to me. And although I feel as an American, I naturally know more about everything than the Canadians, but my friend to the north seems to know more about me about accounting. So now I have questions for him. What is a Canuck? A Canuck? Yeah. What’s a Canadian word? You guys were throwing it around all the time. Educate us. A lot of Americans would just been sitting there and with, you know, we, we don’t know. We don’t know. We were just filling lists. What does it mean to be, what does the word cannot? Can mean a Canuck is kind of a contemporary as Vancouver Canuck fans from BC, they occasionally come and watch her Edmonton Oilers play. We don’t like them too much in Alberta. So what is a double double? A double double is from Tim Horton’s. So it’s two creams. Two sugars. Really?

Yeah. In anything. Tea, coffee, whatever you want. Double double two creams. Two sugars. What is a loony Alluni is our dollar. It’s a, it’s, it’s a, it’s a nice looking coin. You know, we want it. We want to save money on a printing paper. Okay, well talk to me about Canadian Bacon. What is Canadian? You talking about? Canadian Bacon, but what is he? I mean, yeah, I’d like a pizza with Canadian Bacon, but what is it? Thick Bacon. Bacon. Okay. Two more questions for you. How important is Brian Adams to the overall GDP of Canada? I, you think about Brian Adams. I mean, is he, is he a true legend up there to people really did get into Bryan Adams who’s is, is he, is he still relevant up there? Less than 1% really? Yeah. What is the overall Canadian opinion of Justin Bieber? We’re not even sure if he’s Canadian anymore. Yeah. Oh, okay. Okay. Okay. Those are the, those are the tough questions I have. Jason, what’s your Edmonton Business Consultant question for Mr Josh Sperl? I’m surprised you didn’t ask what a hoser was. What’s a Holzer? Yeah, a hoser. Yeah, someone on the third line of the hockey team who’s really not pulling his weight.

Nice. Okay, so Jason, that’s your question. That’s your Edmonton Business Consultant code. You have to enter a tough question for him today. I actually had a, a quick two part question. So managing people is weird because as much as you try to avoid it, you always fall into like the emotional spectrum. Now managing finances could be twice as weird because nobody likes to talk about money. So how do you break through any emotional barrier you have with any of your clients and get them to open the door to be comfortable talking about their finances. And then the second part of the question is American whiskey or Canadian whiskey. Wow, that’s loaded. Okay. So really in order to get the right information from the client, it’s a process. So I tell my guys who are training at our firm, you know, the, the, the girls and guys who are training to become CPAs.

And my firm, when you write your Edmonton Business Consultant exams, you get these five page, you know, case studies, let’s call them. And you have to, it tells you everything you need to know about the client. And I tell my CPAs is like, that will never happen in real life. The client is never going to come in with five well-written pages of everything you need to know about the client. And it all comes down to what’s the process to gather all of the required variables. And that’s what makes our, you know, I like to think that’s what makes our firm really successful at financial planning is because, you know, we have a process to gather all of the relevant details. And the way we’ve gone about to establish that process is the overtime clients have come in and they’ve not told us the relevant information. And every time we run into a variable we add it to our planning process, to our checklist, so to speak of these are the things we need to know about, about every client.

You know, it’s, it’s literally grown. Our financial planning process in our template was version 1.07 years ago was five pages and you know, now it’s over 30 pages that we go through with the client. Wow. Wow. Okay. So now as far as helping the client emotionally, you know, kind of deal with the fact they are just doing, they’re afraid to even look at their bank statements. How do you handle it? Do you uh, serve up Canadian whiskey or what, what’s your move? The Canadian whiskey is banned from the office at this point. I just haven’t, I haven’t seen any stats to support that it’s going to increase performance. Okay. Well that’s okay. So Andrew Answer, what are your, what is your, your tough question for our friend north of the border, Mr Canada, who’s coming onto the show to talk down, even notice how he’s talking down to us from up there.

It’s very patronizing. It’s coming. Talking down to us from up north. What is your question for Mr Josh? Right? So you work with, um, hundreds if not thousands of accounts or have in the past, um, and a lot of different business owners. Um, so what is one of the things that you see as the most common problem or one of the things that, um, is s w one simple thing that most people aren’t doing that if they were doing or the, if they fixed would help substantially. So we, we went through one a little bit earlier. It’s the time blocking on my, I really do think that’s the, the main reason why business owners, if I was to rank number one, it actually would be time blocking. And strangely enough, we have, uh, the owner’s schedule in our business plan projections, um, because we really can’t actually project how a business is going to do unless we know how the owners are going to spend their time.

Wow. Um, so the banks ask us all the time, Josh, why do you have this on here? Um, and I tell them, well, I mean, let’s say you have a construction client for example, and he comes to you and he has a great marketing plan. He’s actually going to get the leads to try to double his revenue. He wants to go from, you know, 250,000 or so. He wants to go from 500,000 to a million and he’s been doing five estimates a week and now he actually has a marketing system. Now, where is it in his calendar that he’s going to do twice as many estimates as he did before? Where’s he going to do twice as many jobs, site visits? Um, so I really think it’s that time walking is probably number one. It’s a, it’s a key performance indicator that every single business has and they need to track, um, you know, moving from there.

I think a lot of startups, for example, wait way too long before they sell anything, um, they, they really don’t focus on what’s their minimal viable product. You know, what’s the least amount of time and the least amount of capital they can spend before they’re actually generating some revenue. Right. So I think those things are a good start on, on the failure rates for is for small businesses. And the stats seem to support that. Um, most failed business owners when you actually talk to them, um, you know, most of them list that they, you know, most of them are going to list that they, they simply, there was no demand for their product or service. Um, so if you wait too long to be, you know, to start earning income, um, you don’t have enough time to tweak your product because then you run out of money, which is number two of why they fail.

There you go. Whoa. Uh, Andrew, I think you’ve got more than you bargained. Alright. Now, Josh, I thank you for being on this show today. Uh, you are a great Canadian. Is there any chance that you’re willing to, you know, renounce your citizenship and become a, uh, um, an American?

I don’t think so. Okay.