Maps help us navigate the world, and they not only show us how to get from point A to point B, but, depending on the type of map, they can also help us to see where patterns, clusters, and gaps exist in a spatial environment. As part of KCARD’s state-wide Local Food System Expansion Initiative, a series of interactive maps has been developed to visualize the Kentucky local food system. Stay tuned for parts two and three of the series in the next few weeks. We will present a closer look into local food sales in Kentucky and the various industries that make up the local food system.
April is Financial Literacy Month, so it’s a great time to take a look at your business’s financials! One of the pieces of advice we often tell agribusinesses is to “own your numbers”. As a business, you should understand your income and expenses, and know where the numbers on your financial statements came from. Check out this post to understand what financial statements KCARD can help with and why financial projections are important for your business.
We have a saying in KCARD when we are looking at financial statements or projections that come into our shop – “Did you find the dead body in them?” This is our little way of referring to the situation where we see a financial statement and instantly know that something is not quite right. A lot of times it is not on purpose. Instead, it is often where someone makes a mistake as they are developing the statement that can lead to the financial reports being inaccurate and the business owner not truly understanding the past or future financial performance and health of their business.
In our blog post a few weeks ago, we took a look at how you develop initial revenue assumptions for a new business. In this post, let’s talk about an existing business and how we help that business develop financial projections. Why bother with developing projections? You know they are going to be wrong, right? Sure. Projections will almost certainly not be exactly correct because so many factors go into what will happen to reach a sales number or expense number.
To prepare financial projections for a new business, you have to be able to come up with a way to calculate expected revenue. I have had conversations with people who insist that there is no way to come up with such a number and really struggle with this. How do you calculate your expected revenue for the next year to three years?
To continue our financial series this week, we’re discussing balance sheets. Your balance sheet shows what you own (assets) and what you owe (liabilities) on a specific date. This important financial statement says a lot about your business…
When working with clients, KCARD often starts by looking at a current income statement (also called a Profit/Loss statement) that is in operation and helps develop a projected income statement for a new or expanded operation. This helps to show if the business is profitable now or will be profitable in the future. However, the cash flow statement is critical to understanding whether the business will be able to survive the initial startup stage or any downturns. This statement shows inflows and outflows of cash to or from the business. So what’s the difference between the two and how they are used?
If you ask any KCARD employee where they turn to first in a business plan they receive, there’s a good chance that – after reading the summary of what the business is wanting to do – the profit/loss statement will be the first page reviewed. We will start looking at how revenue was calculated and whether the expense lines show everything that we expect to see in that particular business. In the next few weeks, we will be going into more detail on how to develop financial projections, stay tuned.
The Kentucky Center for Agriculture and Rural Development is a non-profit organization established to facilitate agricultural and rural businesses in Kentucky. We are supported primarily through grants provided by the USDA Rural Cooperative Development Program and the Kentucky Agricultural Development Board. Additional support is provided through our work with partners around the state and through fees charged for select client services.
