by Charmel Flemming
Hi, I’m Charmel Flemming, CEO and founder of F Twelve in South Africa. F Twelve is founded on the premise of using innovative cloud-based accounting technologies to provide real-time and relevant information to clients. As an outsourced cloud-based accounting company, we are committed to solving the challenges many small and medium business owners face. This goes beyond just accounting but spans into real business challenges because your business functions as an ecosystem and all the parts work together and rely on each other.
I started F Twelve because I’m passionate about empowering business owners to make better business decisions through adequate knowledge, demystifying accounting tools and making financial and accounting analysis more business-owner-friendly.
The first thing that we, as accountants, often take for granted, is assuming that everyone understands what we are talking about when we are talking accounting. To shed the stigma on accounting and its mystery, we have put together a reference list that you can save and refer to when you analyze your next set of financial statements.
Here are some of the most common terms that may arise when you are consulting your books. It is a good idea to try to understand these terms so that you do not get intimidated when you receive your first or next set of financial statements.
Accounts Payable or Creditors: Simply put, a bill that your business hasn't paid yet.
Accounts Receivable or Debtors: This is the money due to your business for goods delivered or used, or services rendered, but has not yet been paid for by customers.
Working Capital: A good way to judge the financial health of your business. The universal net working capital formula is; Net Working Capital = Current Assets – Current Liabilities. If your working capital is low, your business might struggle to grow. But your working capital can also be too high – which is a sign you’re not properly reinvesting your cash. The level of working capital is different for different sectors.
Cash flow: Cash flow is the money that is moving (flowing) in and out of your business in a month. Cash is different to income – cash only includes spendable money.
Turnover: Sales and turnover are concepts that are similar to one another and are often used interchangeably. Sales refer to the total value of goods and services sold by a business whereas turnover is the income that a business generates through trading its goods and services.
Revenue: The basic revenue definition is the total amount of money brought in by a company’s operations, measured over a set amount of time. A business’s revenue is its gross income before subtracting any expenses.
Profit: There are three types of profit that act as measures of a business’s success. Gross profit shows what money was left after paying for the goods and services sold. Operating profit shows what's left after also paying operating costs such as rent, electricity, phones and staff. Net profit shows how much money it's making after taxes. Net profit is what you get to keep.
A financial statement is a report that shows the financial activities and performance of a business. There are four main types of statements that provide a good view of the financial health of your business.
Statement of financial position: Also known as a balance sheet, it shows your business’s financial condition through assets, liabilities and owner's equity at a single point in time.
Statement of comprehensive income: Also known as a profit and loss statement, shows your business’s revenues, costs and expenses over a set period.
Cash flow statement: The cash flow statement shows how changes in the balance sheet accounts and income affect cash. A cash flow statement is concerned with the flow of cash in and out of the business and excludes non-cash items such as depreciation.
Statement of changes in equity: Also called a statement of retained earnings, it shows changes in the equity of your business. The statement of changes in equity shows you the shifts in how much money your business keeps rather than pays out to shareholders as dividends.
As a small business owner, knowing your business's financial standpoint helps you plan better and anticipate any hurdles that may arise along the way. To understand what you are looking at when reviewing your financial statements, you first have to learn the language of accounting. It’s like learning the alphabet before you start to read and comprehend stories.
Many small business owners are too scared to look at the numbers in their business because they don’t know what the jargon means. We are here to hold your hand and teach you how and where to look.
Charmel Flemming founded F Twelve in South Africa, fuelled by the desire to ease the burden of small and medium businesses and only the slightest hint of FOMO in the accounting space. An experienced Chartered Accountant with corporate experience primarily within the Mining Space, she focuses particularly on the areas of Risk and Governance. In her professional and personal capacity, she has taken on a number of Board / Trustee positions in order to enhance this knowledge area. Charmel is particularly strong in roles which require ‘big-picture’ thinking. She enjoys working in an entrepreneurial environment and seeks opportunities that leverage both her technical competence with her entrepreneurial inclination. Charmel accepts non-executive director positions of listed and unlisted companies. She is a “critical friend” and acts in the interests of the company’s stakeholders.
More articles by Charmel
