> FYI, this spreadsheet does not use words like income, profit, loss, expenditure, etc. in the same way that businesses and accountants use the terms.
That's a very polite and roundabout way to say the spreadsheet is wrong...
The spreadsheet is not wrong. It's just named incorrectly. It should be called "Income Statement Generator" because that's exactly what it is.
It's not though. For example, the hardware/software purchases in month 1 are an expenditure, but would likely be a depreciation expense over a period of time.
Generally in the US, if an individual unit costs under around $5k it's easier to just count it as a one-time expense instead of dealing with a depreciation schedule.
Can you give an example? In Australia, you'd need to buy hardware or software for more than $30,000 per unit to be forced to depreciate it over multiple periods. Anything cheaper than $30,000 can be expensed right away. So I'm looking at it through Australian optics and having "Hardware/software" under expenses would be fine for almost every small business here.
Yeah, I guess you're right. It's just confusing to see them call the spreadsheet "Cashflow projections" and then use the words 'expenses' and 'profit/loss'. But then again, they also use 'expenditures', so who knows what they're going for. In their example spreadsheet (and to your point) I guess all the expenditures could correspond 1:1 with expenses, so in this case cashflow == profit maybe.
In Denmark, anything over 2000 USD has to be depreciated.
In many years of having had accounting terms explained to me and glossaries listed, I have never seen such clean, concise and effective examples and explanations of the differences between oft-confused terms. Do you have a cheat-sheet glossary of (official) accounting terms in your own words somewhere?
I used to work as a management consultant for senior executives of tech companies. I learned the essentials of accounting by going through this workbook on a five-hour flight: https://www.amazon.com/gp/product/0132744376/ref=ppx_yo_dt_b...
It's filled with simple fill-in-the-blank examples, but the repetition really helped it stick.
Thanks for pointing this out.
Really important to have a 3-statement model for your company, meaning a P&L (income statement), Balance Sheet and Cash Flow. This is especially important for companies with big gaps between cash collections and actually earning revenue (such as companies that collect annual contracts upfront but are earned monthly). We've seen a lot of companies trip up on this.
We have a free model on our website that has all three statements and is easy to use: https://www.graphitefinancial.com/open-source-financial-mode...
And in reverse, all of those juicy options you pay your staff with should be income statement expenses, and then reversed as non cash on the cash flow statement.
I think you are confusing cash-based accounting (which this spreadsheet is about) from accrual-based accounting (which is what you have described).
As they say, cash is king
Example: Cash flow is not the same as profits/losses. If you buy a $1M CNC machine for $1M in cash, your profit is $0 but your cashflow is -$1M.
Example two: Expenditures are different from expenses. The date you agree to buy (and are legally contracted to buy) a $1M CNC machine may be different than the date that those funds leave your bank account. (And those dates may be different than the dates over which the $1M CNC machine depreciates and eventually breaks down.)
Issues like these two can cause a business to run out of cash, even when then business is making a legitimate profit. This is why an income statement detailing your profits & losses is not enough - you also need a cashflow statement.