Josh Aharonoff, CPA

Your CFO Guy

Providing content to an audience of over 300k, helping professionals grow with Finance & Accounting

Founder

Mighty Digits

Mighty Digits is a consulting firm specializing in Accounting and Finance services for early stage startups. Services include Financial modeling, Month end Close, AP / AR Management, Payroll, Compliance Filings and more.

CEO and Founder

Graphite Financial

Senior Associate - Strategic Finance

Skill Silo

•	Co-founded and led an investment backed startup that pair’s language professionals with students via live 1-on-1 sessions of video conferencing.
•	Built out entire Accounting processes. Established best practices for reporting, managing, and forecasting Finance / Accounting.
•	Prepared and filed tax returns, extensions, and K-1’s.
•	Recruited, hired, and managed 50+ contractors.
•	Led the company through our first investment via a tech accelerator.
•	Designed and implemented sales and marketing strategy to acquire both consumers and businesses.
•	Delivered multiple presentations in front of investors, and audiences in excess of 800 members.

Co-founder and CEO

KPMG

•	Reviewed income tax provisions for accuracy and completeness of client’s estimate of total income tax liability for each quarter, determined and noted items that required revision, and communicated to client recommended updates to calculations
•	Prepared quarterly estimated tax payment calculations, federal and state extension calculations and extension forms, and federal income tax returns including Form 1120 and Form 1065on a consolidated basis 
•	Delegated work and supervised projects involving first and second year associates.
•	Prepared presentations and trainings to teach first and second year associates the nature of certain tax engagements.
•	Provided support to KPMG Audit practice on various occasions and assisted with tying-out financial statements and footnotes, performing cash confirmations and conducting final analytics to discover and address any errors and inconsistencies
•	Participated in numerous recruiting events involving seeking new talent, as well as maintaining relationships with prospective employees.

Associate in Global Banking- Tax Group

Fractional CFO | Founder & CEO at Mighty Digits | Follow Your CFO Guy for Finance & Accounting tips!

I live and breathe 2 things...

Finance & Accounting + Startups

Here's what I do:

--> I share Finance & Accounting Best Practices & Advice everyday 

Those usually involve suggestions for running a SMOOTH Finance & Accounting function...filled with some pretty design 


--> I'm also the CEO of an excited Fractional CFO firm (Mighty Digits), filled with some really great minds...

...accomplishing some real big things like:

- Building WORLD CLASS Financial Models for Startups that have gone on to raise over $400M (!) in the last few years 

- Building clean & appealing Dashboards giving VISIBILITY to the CEO, Board Members, and Investors FAST 

- Supporting 40+ high growth startups in everything and anything you could expect out of a Finance & Accounting function..

I'd love to connect and learn more about how we can work with one another - drop me a note at josh@mightydigits.com

Learn about Accounts Payable & Accounts Receivable
The Yin and Yang of your working capital ☯️

I’ve seen many companies have entire departments dedicated to each of these 2 functions..

and there’s a lot to be said about each.

Let’s start with the basis

➡️ What do they mean?

Accounts Payable (AP) → Money you owe to suppliers for goods or services purchased

Accounts Receivable (AR) → Money customers owe you for sales generated but not yet paid

➡️ Where do they show up on your financial statements?

They are both part of your working capital, and appear on your balance sheet

Accounts Payable → Current Liabilities

Accounts Receivable → Current Assets

The movements in these accounts get shown on your statement of cash flows in your Cash from Operating Activities

➡️ What are the journal entries?

Accounts payable → Goes up with a credit, and down with a debit

Accounts receivable → Goes up with a debit, down with a credit

➡️ Why are they important?

These 2 accounts can cause wild swings in your cash flows

Accounts Payable → the more favorable your credit terms with suppliers, the stronger your cash position

Accounts Receivable → the quicker you collect your cash, the less bad debt, and the more favorable your cash position

➡️ What are some formulas around these?

1️⃣ Accounts Payable Formulas:

Accounts Payable Turnover → this measures how many times a company pays off its accounts payable balance in a specific period

Formula = Purchases on credit / avg accounts Payable

Days Payable Outstanding (DPO) → Represents the average number of days it takes a company to pay its suppliers

Formula = Accounts Payable / Purchases on Credit * number of days

*note that for manufacturing companies, the denominator is often times replaced with COGS.

2️⃣ Accounts Receivable Formulas:

Accounts Receivable Turnover → this measures how many times a company can convert its accounts receivable balance into cash in a given period

Formula = Net Credit Sales / Avg AR balance

Days Sales Outstanding (DSO) → this measures how long it takes on average to collect again your receivables

Formula = Accounts Receivable / Net Credit Sales * Number of Days

Bad Debt Expense ratio → This show you how much you can expect to have in bad debt for each dollar in AR

Formula = Bad debt expense / Total Credit Sales

That’s my take on these 2 popular functions!

What else would you add?

Let us know by joining in on the discussion in the comments below 👇

Learn every Excel CTRL Shortcut ⌨

I’ve said it before and I’ll say it again…

excel shortcuts can make you FLY ✈️

They take practice, and at first will involve more work than using your mouse…

but once you commit these shortcuts to muscle memory, the sky is the limit.

You can be on a call with a client and make their vision become a reality instantly…

you can be on a call with your boss and impress him / her with your speed…

you can be all alone on a saturday, and play a piano symphony with your keyboard.

What you may not realize is that many of these keyboard shortcuts you already know…

and the rest will become 2nd nature when you practice.

Let’s dive in to my favorite: 

📌 Grab your high-res copy of this guide and display it prominently!
🔗https://lnkd.in/eDSM7yiU

➡️ THE ONES YOU ALREADY KNOW

CTRL + N → create a new workbook

CTRL + P → print your document

CTRL + S → save your workbook

CTRL + O → open a workbook

CTRL + A → select everything

CTRL + U → apply underline

CTRL + B → make text bold

CTRL + V → paste content

CTRL + C → copy content

CTRL + Z → undo action

CTRL + X → cut content

CTRL + I → italicize text

CTRL + T → add a table

CTRL + F → find text

CTRL + Y → redo action

➡️ HIGHLY EFFECTIVE SHORTCUTS

CTRL + ARROW KEYS → Move to the first/last cell in a section

CTRL + PgUp / PgDn → navigate between tabs

CTRL + SPACE → select an entire column

CTRL + + → add a new column / row

CTRL + ] → select direct dependents

CTRL + 1 → cell formatting options

CTRL + [ → select direct precedents

CTRL + - → remove a column / row

➡️ LESSER-KNOWN SHORTCUTS

CTRL + G → go to a specific cell

CTRL + K → create a hyperlink

CTRL + : → input current time

CTRL + ; → input current date

CTRL + H → find and replace

CTRL + Q → quick analysis

CTRL + W → close window

CTRL + E → use flash fill

➡️ THREE-KEY SHORTCUTS

CTRL + SHIFT + F3 → Generate a named range from the selection

CTRL + SHIFT + F6 → Switch to the previous workbook window

CTRL + SHIFT + U → display or hide the formula bar

CTRL + SHIFT + O → highlight cells with comments

CTRL + ALT +V → open the paste special dialog

CTRL + SHIFT + ` → change to general format

CTRL + SHIFT + L → apply or remove filters

and several others!

===

Be sure to hang up this cheat sheet in your office, and practice each one - before you know it…you’ll be a pro.

Which shortcut is your favorite?

Let us know in the comments comments below 👇

10 Finance & Accounting interview questions you NEED to know
Check out each answer below 👇

I’ve hired dozens of accounting professionals in my career…

and have been on the other end of the interview numerous times as well.

To get hired for a job, there are so many things you’ll need to show such as:

1. You have the TECHNICAL skills
2. You have the SOFT skills

For #1, these questions have got you covered:

1️⃣ What are the 3 financial statements, and how are they connected?

This is one of the most valuable topic you can show your understanding of

The financial statements are EVERYWHERE in finance & accounting…

whether that be in closing the books, reporting to management, or preparing a forecast.

2️⃣ What’s the difference between Cash vs Accrual accounting?

Did you know that there are 2 different ways that you can prepare your financial statements?

Each one can show radically different numbers from the others!

3️⃣ What is Deferred Revenue?

This may be the most popular adjusting journal entry under accrual accounting.

4️⃣ How do journal entries work?

Journal entries are the heart and soul of double entry accounting

5️⃣ What’s a bank reconciliation, and why is it important?

This is the most important part of a month end close…if they aren’t completed, you can’t trust a thing!

6️⃣ What is an accrued expense?

Under accrual accounting, accrued expenses are everywhere.

7️⃣ What are workpapers, and how should you organize them?

Workpapers are like an accountants notes that support the entries made in a month end close

8️⃣ What are the chart of accounts, and how should they look?

The Chart of Accounts help you communicate what’s happening to the readers of the financial statements

9️⃣ What’s a contra account and how does it work?

Examples of contra accounts are discounts, accumulated depreciation, and refunds

🔟 How do you build a statement of cash flows?

If you know simple algebra, you can complete one easily!

===

Did you know the answer to all of them?

You’re hired! 🤝

If not, don’t worry - the video below has got you covered!

What other questions have you seen in a finance & accounting interview? 

Let us know in the comments below 👇

Learn about 4 CRUCIAL metrics for any business

Gross Profit vs Net income vs EBITDA vs Cash Flows

Each one of these metrics tell you something different, and have their own time & place

Let’s do a deep dive into each

1️⃣ GROSS PROFIT

🤔 What it means

▪️ The amount that’s left over from your revenue after you subtract the cost to deliver your product or service

🔍 Where it’s found

▪️ The Profit & Loss

🔢 What’s the formula

▪️ Revenue - COGS

💡 Why it's important

▪️ It helps you understand the maximum amount of money your business can earn - if you have a negative gross profit, you don’t have a business!

2️⃣ NET INCOME

🤔 What it means

▪️ The net profitability of your business for a specific period of time - IE all income less all expenses

🔍 Where it’s found

▪️ The Profit & Loss

🔢 What’s the formula

▪️ Revenue - COGS - Operating Expenses + Other Income - Other Expenses

💡 Why it's important

▪️ This is the ultimate number that you are generating in profitability from your business - if you keep posting losses, you will need to raise capital to sustain your operations

3️⃣ EBITDA

🤔 What it means

▪️ Earnings before Interest, Tax, Depreciation, and Amortization

🔍 Where it’s found

▪️ No where - it’s compiled separately and is a non GAAP Metric

🔢 What’s the formula

▪️ Net Income + Interest Expense - Interest Income + Taxes + Depreciation + Amortization

💡 Why it's important

▪️ Many feel that EBITDA is a good approximation for cash flows. It is also commonly used to value businesses

4️⃣ Cash Flows

🤔 What it means

▪️ How much cash went in and out of your bank account

🔍 Where it’s found

▪️ The Statement of Cash Flows (or by taking the ▲ in cash on your balance sheet)

🔢 What’s the formula

▪️ Cash from Operating Activities + Cash from Investing Activities + Cash from Financing Activities (Or ending cash - beginning cash)

💡 Why it's important

▪️ Cash is king - you can have the most profitable business in the world, but if your expenditures keep outpacing your receipts, you’ll have to raise capital to sustain your operations

===

Now that you know these 4 - which one is your favorite?

For me...Gross Profit.

Everything else falls into place once you have great margins...

But ofcourse, there are tons of factors to consider

How about you?

Let me us know by joining in on the conversation in the comments below 👇

Fractional CFO | 300k+ Finance & Accounting Audience | Founder & CEO of Mighty Digits

Learn about the MOST IMPORTANT topic in Finance & Accounting 😮
The Accounting Equation 🧑‍🏫

This is equation pretty much the equivalent of E=MC squared for physicists 🧪🔬

You may be wondering though…what’s so special about it? 

Let me show you:

➡️ What is the Accounting Equation?

The accounting equation states that Assets = Liabilities + Owners Equity

This summarizes how to read a Balance Sheet, and introduces the concept of “double entry” accounting, where every transaction in a business affects 2 items in a balance sheet, and at least 1 of these section.

This equation must always tie - no exceptions!

➡️ What’s a Balance Sheet?

A Balance Sheet is a snapshot of your business that showcases your Assets, Liabilities, and Owners Equity. Some call it the “net worth” of your business.

Here’s what each of these mean:

Assets → Items of economic value that the business owns or substantially controls (cash, receivables, inventory)

Liabilities → amounts that you owe to creditors (credit cards, loans, deferred revenue)

Owners Equity → amounts that the owners are owed (IE: what’s left after you subtract liabilities from assets)

So the accounting equation explains that all of your assets came from either amounts funded by creditors (liabilities) or owners (owners equity)

➡️ Why is this so special?

A few reasons:

1️⃣ It all balances

Since Assets must always = liabilities + owners equity, you know that anytime one side is affected, there must be a corresponding effect on the other side

2️⃣ Debits & Credits

Debits & Credits are the mechanism you use to showcase the movements of account balances in your general ledger.

So however they work for Assets, is the complete opposite for how they work for Liabilities and Owners Equity.

For example:

Assets: ⬆️ Go up with a Debit, ⬇️ Go down with a credit

Liabilities + Owners Equity: ⬆️ Go up with a credit, ⬇️Go down with a debit

3️⃣ Cash flows

If you understand the accounting equation, you can prepare a statement of cash flows under the indirect method

See…Assets = Liabilities + Owners equity

Which means the net change of Assets from one period to another… 

is equal to the net change of Liabilities + Owners equity from one period to another.

Still with me? Good…

So if we flip the calculation on one side of the equation, and add up the net change in all accounts, we’ll get to 0.

Like this:

Last months Assets - This Months Assets

+

This Months Liabilities - Last months Liabilities

+
This months owners equity - last months owners equity

= 0

Great! So if we do that now for all accounts EXCEPT for cash…that becomes our plug for how much our cash went up or down

===

That’s my take on the famous accounting equation.

Got anything else to add?

Join the discussion in the comments below 👇

20 Excel Tricks & Tips you NEED to know
If you can unlock each of these, you will become an excel wizard 🧙‍♂️

👉 Download high res infographic and worksheet for FREE in the next 48 hours:
🔗 https://lnkd.in/eRbavm5h

Here are my favorites: 

➡️ Unpivot data

Most of the time in finance & Accounting we have data where our accounts go VERTICALLY…

and our dates go HORIZONTALLY.

That makes it easy for a HUMAN to understnad, but dificult for a MACHINE to work with.

Instead, you need to “unpivot” your data so that your dates show up in a new column with the value for each account.

So if you have 12 months, that means that each account will now have 12 rows worth of data.

Step 1 👉 Select your range (with dates going horizontally)

Step 2 👉 Select Data > From table/Range

Step 3 👉 Select all date columns in powerquery, right click, and hit unpivot columns

➡️ Duplicate Window

Need to toggle between multiple tabs in a work sheet? Open a new window and you’ll see them both update in real time.

👉 Hit View > New Window

➡️ Use SUMPRODUCT, the most powerful formula

SUMPRODUCT is my favorite function because you can in essence do close to anything with it.

Most people treat it as multiplying 2 ranges by one another and getting the sum of the values…like this:

=SUMPRODUCT(range1,range2)

But a way more powerful way instead is like this:

=SUMPRODUCT ((range)*(condition1)*(condition2))

This gives you the maximum flexibility with working with tables in both directions

➡️ Highlight cells based off of a custom rule

You may have heard of conditional formatting…but do you know how to set a custom rule with it?

Most people don’t, and it can be confusing.

Say you have a table with an X and Y axis…simply create a table to the right of it with a true of false condition that maps to each cell in that table.

Then take the formula in your top left table that you just created, and make that your custom rule in conditional formatting.

Now your table will update with whatever formula you set.

===

There are a lot more cool excel tricks but I only have 3k characters on this post - but fret not!

You can grab the full worksheet, walking you through each and ever trick for free via the link on the bottom of the graphic for free in the next 48 hours.

What are some other cool excel tips & tricks?

Let us know by joining in on the discussion in the comments below 👇

Master your Cash Flows with these 13 formulas
Because It’s all about the cash money 🤑

There are countless metrics to measure cash…

but which metric is the best one to use?

That depends a lot on your business and a number of other factors

Let’s do a deep dive on a number of metrics to give you a grip on your cash:

1. Operating Cash Flow (OCF):
   
  • Formula: OCF = Net Income + Depreciation + Amortization + Other Non-Cash Items - Changes in Working Capital
   
  • Essence: Gauges the cash generated or used by a company in its core business operations.
   
  • Reading the Numbers: More operating cash flow means better liquidity for day-to-day operations, investments, and paying off debts.
   
2. Free Cash Flow (FCF):
   
  • Formula: FCF = Operating Cash Flow - Capital Expenditures
   
  • Essence: Tracks cash that's available for distribution to stakeholders or for reinvestment.
   
  • Reading the Numbers: Positive FCF shows a firm's ability to generate cash and fund expansions, pay dividends, or lower liabilities.
   
3. Cash Conversion Cycle (CCC):
   
  • Formula: CCC = Days of Inventory Outstanding + Days of Sales Outstanding - Days of Payables Outstanding
   
  • Essence: Calculates the time taken to turn investments in inventory and receivables into cash, less the time to pay off suppliers.
   
  • Reading the Numbers: A shorter CCC implies effective working capital management and sufficient cash for meeting obligations and growth.
   
4. Net Cash Flow Formula:
   
  • Formula: Net Cash Flow = Operating Cash Flow + Investing Cash Flow + Financing Cash Flow
   
  • Essence: Represents total cash inflows and outflows from operating, investing, and financing activities.
   
  • Reading the Numbers: Positive net cash flow means a firm is generating more cash than it's spending.
   
5. Discounted Cash Flow (DCF) Formula:
   
  • Formula: DCF = CF1 / (1+r)1 + CF2 / (1+r)2 + ... + CFn / (1+r)n
   
  • Essence: Valuates an investment or a company by projecting its future cash flows to the present.
   
  • Reading the Numbers: Higher DCF suggests greater future cash generation and increased value.
   
6. Present Value Formula:
   
  • Formula: PV = CF / (1+r)t
   
  • Essence: Determines today's worth of a future cash flow.
   
  • Reading the Numbers: A greater present value indicates a more valuable future cash flow.
   

===

There are even more cash formulas than the ones listed above, but I’m limited to only 3k characters.

Which ones would you add?

Let us know by joining in on the discussion in the comments below 👇

Learn how the Balance Sheet and Income Statement are connected🔗

The Balance Sheet holds the most information out of the three financial statements 

and draws HEAVILY from the Income Statement

But how exactly are they linked?

Here, I'll show you:

1. Retained Earnings & Net Income

This is the key connection. 

Your P&L condenses into Net Income, which then integrates into your Balance Sheet under Retained Earnings.

   
  • Balance Sheet → Retained Earnings
   
  • Profit & Loss → cumulative net income
   
2. Depreciation & Accumulated Depreciation

Depreciation reflects the deterioration of your fixed assets….
and recorded as an expense on your income statement…
followed by an accumulation to your balance sheet.

   
  • Balance Sheet → Accumulated Depreciation
   
  • Profit & Loss → Total past depreciation expense
   
  • Journal Entry: Debit Depreciation, Credit Accumulated Depreciation
   
3. Deferred Revenue & Revenue

Revenue represents your earnings… 
Deferred Revenue is the income billed/collected but not yet fulfilled.

   
  • Balance Sheet → Deferred Revenue
   
  • Profit & Loss → Future Earnings
   
  • Journal Entry: Debit Deferred Revenue, Credit Revenue
   
4. Prepaid Expenses & Expenses

Prepaid Expenses are costs paid in advance, which are yet to be utilized. 
Upon usage, it lowers your prepaid asset and is expensed on the P&L.

   
  • Balance Sheet → Prepaid Expenses
   
  • Profit & Loss → Upcoming Expenses (like software, marketing, travel)
   
  • Journal Entry: Debit Expense, Credit Prepaid Expense
   
5. Accruals & Expenses

Accruals are estimated expenses incurred but not yet paid/settled. 
They appear as liabilities and reduce upon payment/settlement.

   
  • Balance Sheet → Accrued Liabilities
   
  • Profit & Loss → Recognized expenses
   
  • Journal Entry: Debit Expense, Credit Accrued Liability
   
6. Accounts Payable & Expenses

Accounts Payable is what you owe to suppliers for goods/services. 
It's a liability that decreases with payments.

   
  • Balance Sheet → Accounts Payable
   
  • Profit & Loss → Recognized expenses
   
  • Journal Entry: Debit Expense, Credit Accounts Payable
   
7. Accounts Receivable and Revenue

Accounts Receivable is what customers owe you for sales. The asset reduces upon receiving cash.

   
  • Balance Sheet → Accounts Receivable
   
  • Profit & Loss → Earned Revenue
   
  • Journal Entry: Debit Accounts Receivable, Credit Revenue
   

===

These are some of the ways the Balance Sheet & Profit & Loss interact... 

but there are countless others. 

What would you add?

Let us know in the comments below 👇

Learn about Debits & Credits with 20 examples👇

➡️ What are Debits & Credits?

Debits & Credits are the mechanism in which you can communicate amounts that are increasing or decreasing on your general ledger.

Learn the full details in this post right here: https://lnkd.in/eEFcftQk

➡️ Can we go over some examples?

Here are 20 :

1. Record revenue (cash basis) → DR Cash, CR Revenue

2. Collect cash from receivables → DR Cash, CR Accounts Receivable

3. Take out a loan → DR Cash, CR Loan Payable

4. Earn revenue from deferred → DR Deferred Revenue, CR Revenue

5. Record legal fees net 30 → DR Legal Expenses, CR Accounts Payable

6. Pay legal fees from net 30 → DR Accounts Payable, CR Cash

7. Accrue consulting fees → DR Consulting Fees Expense, CR Accrued Liabilities

8. Record prepaid software → DR Prepaid Expenses, CR Cash

9. Amortize prepaid software → DR Software expense, CR Prepaid Expenses

10. Purchase fixed assets → DR Fixed Assets, CR Cash

11. Depreciate fixed assets → DR Depreciation Expense, CR Accumulated Depreciation

12. Record discounts → DR Discounts, CR Cash

13. Purchase raw materials → DR Raw Materials, CR Accounts Payable

14. Convert raw materials to finished goods → DR Finished Goods Inventory, CR Raw Materials Inventory

15. Convert finished goods to COGS → DR Cost of Goods Sold, CR Finished Goods Inventory

16. Transfer money to fully owned subsidiary → DR Due to/from Subsidiary, CR Cash

17. Record legal fees from equity raise → DR Equity Issuance Fees, CR Cash

18. Convert convertible notes to Preferred equity → DR Convertible Notes, CR Preferred Stock

19. Set allowance for returns → DR Allowance for Returns, CR Sales Returns

20. Write off non-collectible funds → DR Bad Debt Expense, CR Accounts Receivable

===

Debits & Credits are the foundation to accounting & double entry accounting, and now you’re a pro!

Got any other ones to include?

Let us know by joining the discussion in the comments below 👇

The Accounting FP&A Yin Yang ☯️
they are 2 sides of the same coin 🪙

Accounting & FP&A each contains key responsibilities…
and together they make up your Finance & Accounting 🤝

So often I see these 2 sides clash

But when they work in harmony with one another, great things happen

Here’s an overview on what Accounting does

**Accounting**

🔸Financial Reporting - “closing out” your financial statements in your accounting software (often known as bookkeeping)

🔸AP - coordinating & processing bill payments to vendor

🔸Invoicing - sending invoices to customer, and coordinating collections

🔸Payroll - onboarding employees, approving & processing payroll, coordinating with state tax agencies (parts of this function may be handled under HR)

🔸Taxes - annual federal & state income tax filings, Delaware franchise tax, sales tax (typically not done in house at a startup)

🔸 Audit - coordinate audit with external auditing firm (usually done after Series B)

But that’s just one side of the coin. The other function is just as crucial…

**Financial Planning & Analysis (FP&A)**

🔹 Projections - adding forecasted figures for all areas of the business (revenue, cash flows, ARR)

🔹 Data analysis - analyzing data to optimize for better costing / profitability

🔹 Budget vs Actuals - comparing what you had projected vs what actually took place. (My favorite area of FP&A)

🔹 Board reporting - providing the board of directors with key summaries on what’s happening…another one of my favorites

🔹 Fundraising - wowing investors, and showing them how you’ll be 100x’ing each month for the rest of eternity 🤑

What’s my #1 advice for Finance & Accounting professionals?

LEARN BOTH

There’s so much you can do when you understand how to prepare data, as well as analyze & draw meaningful insights from that data

If you’re an accountant - learn how to build a 3 statement model, or how to prepare a budget vs actuals…or a beautiful dashboard

If you’re in FP&A - learn what debits & credits are…or how cash vs accrual accounting works

I’ve seen few achieve this well, unless you’re a CFO - which would be a require you to learn both

But don’t wait till you’re a CFO. Learn today

Your career depends on it

What would you add?

Let us know in the comments below 👇

Everything you need to know about Bank Reconciliations 👇

Bank reconciliations to me are possibly the most important part of a month end close

➡ What is a Bank Reconciliation?

A Bank Reconciliations is a matching of the transactions on your bank / credit card statements to the transactions in the general ledger

It allows you to confirm that the balances for your bank accounts & credit cards in your general ledger match to you the actual statements on the banks website

➡ Why are Bank Reconciliations so Important?

If a Bank Reconciliation isn't completed, I wouldn't trust anything that I'm reading on a company's financial statements

Why?

Because there's no way to validate that the transactions used to compile the numbers shown on the general ledger

There would be no way to confirm that there are no mistakes in the numbers being used, or even worse, that there was no fraud

➡ How are Bank Reconciliations performed?

Bank Reconciliations are performed by entering in the ending balance shown on your bank / credit card statement, and confirming that the transactions in your accounting software + the beginning balances shown = the ending balance on your statement

If the amounts don't match, it can either mean a mistake in the data being used, or certain exceptions which can be valid

➡ What are Some Common Reasons for Why a Bank Reconciliation May Show Different Ending Balances Between Your Bank and General Ledger?

Here are a few usecases

❌ There are duplicate transactions in your general ledger ➡ action here is to remove these duplicate transactions

❌ There are missing transactions in your general ledger ➡ action here is to add back these transactions

✅ There are transactions that haven't cleared the bank yet, such as checks that have not been cashed ➡ this is an acceptable reason, and should be monitored each month to ensure accuracy

✅ Transactions posted on a cutoff date ➡ often times, transactions will be posted in your general ledger on the same date in which the period ends on your bank / credit card statement. 

When that happens, it is common for some transactions to be shown in your general ledger that haven't yet cleared the bank. In this instance, you'll want to ensure that next month these transactions are cleared

Those are a few of my thoughts based off of my experiences working with startups, and closing out their books.

What would you add from your experience?

Let me know in the comments below so we can all learn 👇

10 Ways to improve working capital

Working capital is the lifeblood of your business.

You can have the best business in the world, with the highest margins…

If you have working capital constraints, you may go out of business.

Let’s do a deep dive…

➡️ What it Working Capital?

The amount of liquid assets that a company has available after meeting it’s short term obligations

➡️What’s the Formula?

Current Assets - Current Liabilities

➡️ What are Some Examples of Current Assets?

Cash & Cash Equivalents, Accounts Receivable, Prepaid Expenses

➡️ What are Some Examples of Current Liabilities?

Accounts Payable, Accrued Expenses, Credit Cards

➡️ What are 10 Ways to improve Working Capital?

1️⃣ Charge customers in advance

Charging upfront means you never have to worry about a bad debt expense, and collect sooner

2️⃣ Charge customers on autodebit

Customer’s don’t like to be reminded that they need to pay you

When you charge them automatically, you make the process easier on both sides

3️⃣ Follow up continuously with customers on receivables balance

If you have a receivables balance…don’t assume that customers will just naturally pay

Following up on overdue balances is a MUST in order to get paid

4️⃣ Monitor all subscriptions

Be sure to monitor subscriptions on an ongoing basis, or you’ll find yourself paying for something you aren’t using

5️⃣ Hire fractional consultants instead of full time employees

Hiring a fractional consultant can often times be much more affordable than a full time employee

You’ll also save money on payroll taxes, health benefits, and other incidentals

6️⃣ Raise Capital AHEAD of when you’ll need it

Need to raise capital? Be sure to know exactly when you’ll need the capital, and start planning in advance

If you’re caught by surprise, you’ll almost definitely have more friction

7️⃣ Raise Equity over Debt

This can help you save money, as you won’t have to pay interest or repay the principal

But also comes with a tradeoff…since you’re sacrificing future cash flows of the business to be distributed to a new investor

8️⃣ Require ACH over Credit Card

Credit cards charge 2.9%. If you’re selling a low ticket item, that may not affect you much…

But if you are selling 10s of thousands, that amount can really add up

9️⃣ Ask suppliers for net 30+

You may not be able to collect money more quickly - but can you get approval to spend money more slowly?

Just make sure your suppliers aren’t reading this post 😉

🔟 Get a better grip on your financial data

Improving cash flows takes ACTION

and before you can take ACTION...you need DATA

Consider hiring a fractional CFO to help you organize your financial data - don’t be hesitant to check out my profile while you’re at it 😇

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That’s my take on working capital, and 10 ways to improve it - what would you add?

Let us know by joining in on the discussion in the comments below 👇

Assets vs Liabilities
In many ways, they are polar opposites

In many ways, they are both 2 sides of the same coin

Let’s get into each:

➡️ What are Assets?

Assets represent ECONOMIC VALUE that the company OWNS or substantially CONTROLS (both tangible and intangible)

➡️ What are the benefits of Assets?

Assets help you understand the liquidity of a company, as well as a snapshot of the company’s financial health

The more assets, the better - but too much of a concentration in non cash Assets can mean liquidity challenges for a company

➡️ What are some examples of Assets?

Assets come in many shapes and sizes, and are often times segmented by

1️⃣ Current Assets → These are assets that can be converted to cash typically within 1 year

Examples include Cash, Accounts Receivable, Inventory, Prepaid Expenses

2️⃣ Property Plant & Equipment → These are assets used in the operations of a business that have a useful life of more than a year (also referred to as Fixed Assets)

Examples include Machinery, Vehicles, Laptops, and Buildings

3️⃣ Long Term Assets → These are Assets that a company intends to hold on to typically for longer than a year (opposite of current assets)

Examples include Stocks, Bonds, and Real Estates

4️⃣ Intangible Assets → These are assets that have no physical form, but have value

Examples include Patents, Trademarks, and Copyrights

Now let’s get into the other side…

➡️ What are Liabilities?

Liabilities are financial obligations or debts..that a company OWES to others

➡️ What are the benefits of Liabilities?

Although it sounds like a bad thing, Liabilities can actually be a great thing

1️⃣ Liabilities can signal favorable credit terms with suppliers

2️⃣ They can also represent long term commitments from customers

3️⃣ They can be a great source of funding without having to give up ownership

➡️ What are some examples of Liabilities?

Liabilities can be segmented similar to how assets are segmented (current vs long term)

Let’s go over some examples of liabilities based off of who the obligation is owed to

1️⃣ Obligations to VENDORS → These are obligations owed to those who you may purchase something from

Examples include Accounts Payable, Accrued Expenses, and Credit Cards

2️⃣ Obligations to CREDITORS → These are obligations owed to those who you borrowed money from

Examples can include a Line of Credit, Convertible Note, and Convertible Note

3️⃣ Obligations to EMPLOYEES → These are obligations to the people in your organization

Examples can include Accrued Payroll, Commissions Payable, and Accrued Vacation

4️⃣ Obligations to CUSTOMERS → These are obligations you owe to customers who have purchased something from you

Examples include Deferred revenue (this is a big one), Customer Deposits, Warranty Reserve, and Gift Card Liabilities

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That’s my take on Assets vs Liabilities…there’s so much more to say

What would you add?

Let us know by joining in on the discussion in the comments below 👇

Should you take out Debt, or give up Equity?
The age old debate for how to fund your business!

Most businesses rely on outside funding to accelerate growth and facilitate their working capital needs…

But each form of funding has it’s own perks, and challenges.

Let’s explore each:

➡️ What is Equity?

Equity represents ownership in a company. The business receives money in exchange for a share in the profits or losses of the business.

This leaves the business with an UNCAPPED liability to the owner of the business - there’s no limit to how much you may owe this equity owner…it’s all dependent on the profits or losses of the business, and the eventual sale price.

➡️ What is Debt?

Debt is similar to equity in that it’s a form of funding that you will need to repay to the lender…

only this time, instead of the lender receiving a share in your profits & losses, they receive an exact amount agreed upon in advance.

This can relate to the amount of the loan (the principal), plus additional amounts owed as time passes (interests)

➡️ Pros & Cons of Equity

Equity can be a great way to fund your business, since you don’t need to pay interest, and can repay the amounts owed with the profits of the business.

It can also be a great way to get new partners to help run & operate your business.

But like many things in life…it comes with a cost.

All profits are now split between you and your new owners - now have a smaller piece of the pie! 

Another cost is if you introduce the wrong equity owner, it can cause a lot of issues for your company…eventually leading to your departure, or your company’s demise.

➡️ Pros & Cons of Debt

Debt can also be a great way to fund your business, as you know exactly what you’re getting yourself into, and don’t have to worry about the debt holder making decisions with your business that may not align with your vision.

But debt can be expensive! Debt holders often times get interest payments which can be high, with penalties applied if you miss a payment.

Debt holders also are typically paid before equity holders in the event of a liquidation, leaving you last in line to get paid when you sell your company.

➡️ So which one is better?

Raise equity when…

→ You’re confident that your business goals aligns with your investors

→ the valuation of your business is fair

Raise debt when…

→ You feel confident in your businesses performance, and can see a clear ROI on the cost of the debt compared to the benefits it will bring

→ the terms & interest rates are favorable

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Debt & Equity are 2 powerful ways to fund a business…but each have their pros and cons.

Another option can be to instead you utilize customer contracts for funding.

That means converting your contracts to annual contracts, and charging upfront - now your customers are your source of capital injection, rather than debt or equity holders!

What is your preference for debt vs equity?

Let us know in the comments below 👇

Introducing Monopoly of Finance & Accounting 🎲🎲

If you grew up like I did…

Monopoly was a staple board game in your house.

I must have played 100s of games of Monopoly in my lifetime…

sometimes winning…

many times losing.

Today, I’m proud to release the very first Finance & Accounting edition of Monopoly for you to play with your family!

Here’s what’s included:

➡️ Collect $200 in Stock Dividends when you pass go

A stock dividends is an amount of retained earnings that a company provides to it’s stakeholders.

Make your way around the board, and collect your dividends!

➡️ Tax Refunds

Land on tax refunds, and today is your day!

Collect ERTC credits from the government, and spend that cash wisely!

➡️ Pause your Career and go back to school

Sometimes, we choose a path in our careers only to realize that it is not the right path to us.

A common approach is to go back to school, and get a new degree.

But if you majored in Accounting, you may be able to skip that, and get experience in a new field in the exciting world of Finance & Accounting

➡️ Study for the CPA Exam

OK…it’s not as bad as jail…

but for some of us, it’s just as bad 😂

When studying for the CPA exam, do not pass go, and do not spend time with friends & family…

the CPA exam is your only focus!

➡️ Pick up a ❓ for a tax notice

Some tax notices are good (tax refunds & credits)…

Some are BAD (you owe back taxes & penalties)

➡️ Pick up an excel card

Learn a new formula…

Build a Profit & Loss…

Untangle a circular reference

The sky is the limit with Excel!

➡️ Build a house or a hotel on 8 different property lines

The property lines are:

• The Statement of Cash Flows

• The World of Accounting

• The Balance Sheet

• FP&A

• Capex

• Tax Statements

• Adjusting Journal Entries

• The Financial Statements

➡️ Collect all 4 railroads to master the P&L

The P&L is broken out by 4 sections:

• Revenue

• COGS

• Opex

• Other Income / expense

Collect all for a monopoly!

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I hope you enjoy playing Monopoly Finance & Accounting edition…

and become a PRO at Finance & Accounting after reading each card.

If you enjoyed this post, go ahead and give it a like and share it to help me promote Financial Literacy…the fun way 😆

Learn about Excel…explained like you are 5
Pass this on to your kids so they can become excel pros 👨‍👩‍👧‍👦!

Excel is the #1 software tool for anyone in business…

and is owned by Microsoft, one of the largest companies in the world.

I use Excel for almost EVERYTHING in my life…

and get anxiety when I go too long without seeing a spreadsheet 😱

Let’s talk about what exactly Excel is, and why it’s so useful

➡️ What is excel?

Think of Excel as a large notebook with thousands of “cells”….

and each of these cells can act like a calculator, allowing you to manipulate your data

It’s like having a canvas where you can have the ultimate freedom in managing your data.

We call this canvas a “spreadsheet”

➡️ How do you use Excel?

You type information into each “cell”, and can then reference those cells to perform calculations based off of those cells.

While it’s most common to use excel for numbers, you can also include text, images, and other assets in your spreadsheet

➡️ Why is Excel so popular?

Excel is like a giant puzzle, where all the pieces connect.

Businesses store their information in excel files, and then make changes as needed to their information.

When one cell is updated, any other cell referenced by that cell is updated as well, making it easy to get quick output from your data.

➡️ What can you do in Excel?

Perhaps a better question is what you CANNOT do 😇

With Excel, you can…

🧮 Keep track of your expenses

💻 Calculate things quickly, like how much you need to save for vacation

📊 Make pretty charts to impress your audience

✅ Plan and organize events or checklists

….and much more!

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I learn new things in Excel all the time - like just last week I learned how to create a dashboard with icons that dynamically reference each other (Insert > Picture > Place in Cell).

Have you explained what Excel is to your kids?

Share your experience in the comments below 👇

The Comparison Profit & Loss
one of the most insightful reports out there

Running a comparison profit & loss is a huge value add with financial reporting.

There are tons of benefits…such as:

💡 Understanding any anomalies or errors in this months classifications

💡 Driving insights on whether the business is performing better or worse

💡 Revealing how good of a grip the Finance & Accounting team has on their planning

There are many different ways that you can run a comparison Profit & Loss…

the general idea is that you COMPARE one data set to another…

here are the most popular to compare:

➡️ Comparison against budget

This one’s my favorite…

as you may not be able to get to 0 variances…

but you get the opportunity to now tell the story of what happened, compared to what you thought would happen.

The better of a story you can tell, the more confidence the team has in your work

➡️ This month vs Prior Year

Many businesses are seasonal…

cue the words “black friday” and “holiday shopping”.

That’s what makes comparing this period against the same time last year

➡️ This month vs Prior Month

For those businesses that aren’t seasonal, this metric is great.

It reveals any large spikes from what took place last period…

sounding the alarm bells for further analysis where needed

➡️ YTD vs Prior Yr YTD

Similar to comparing this month to last year…

analyzing YTD vs prior year YTD can yield great insights into how this year is trending

with each new month adding another datapoint to analyze

Here I like to get a line graph, showing how each month performed compared to last year

➡️ This month vs Avg 6 month prior

This one is great to smooth out any anomalies that took place historically…

allowing you to get insight into how well you’re trending.

Most of the time, when I set projections for the P&L, I use a 6 month average with a buffer of some sort

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These are just 5 ways in which you can run a comparison P&L…

there are ENDLESS variations.

The key is to know which variation makes sense / drives the most insight.

What has been your experience with a comparison P&L?

Let us know by joining in on the discussion in the comments below 👇

I had a great time hosting my very first event last Thursday!
It was an engaging a VC roundtable at JPMC .

8 VCs out in NYC joined for an engaging roundtable discussion on all things related to startups, the economy...and ofcourse, AI

It was a pleasure hearing where everyone is, what struggles they are facing, and how we can be each be of service to one another.

This event was such a blast, and it will certainly not be the last! 
Next month I'll be hosting another roundtable, this time for Startup founders out in NYC. If you'd like to be a part of it, feel free to drop me a message.

A huge thanks & shoutout to Kevin Green and Sharia H. in coordinating this event as great cohosts!

Master these tips for structuring your Chart of Accounts (free template)
Learn the Do’s and Don’ts for financial reporting

Each month, I meet with founders looking for help with their bookkeeping…

and almost every time, I see the same mistakes with their chart of accounts.

These are the mistakes holding them back from giving the readers of the financial statements the CLARITY they need when reviewing the financial statements.

Let’s do a deep dive on the do’s and don’ts of structuring your chart of accounts:

But first…

➡️ What is the Chart of Accounts?

Let’s first talk about the Financial Statements, mainly the Profit & Loss, and Balance Sheet.

These 2 statements can all be combined together onto one report called the Trial Balance…and the details of what makes up the values of those reports can be combined together into a report called the General Ledger.

The NAMES of the accounts that show up on these reports is what is called the “Chart of Accounts”.

➡️ How do you Structure your Chart of Accounts?

There are no absolute requirements for how to structure your Chart of Accounts, but there certainly are best practices.

Here are mine:

1️⃣ Don't use Vague Account Names ❌

Got something classified to “Other Business Expense”?

Odds are you’ll get a lot of questions on what exactly this relates to.

Instead, focus on classifying transactions based off of the nature of what they relate to.

2️⃣ Don't use redundant Accounts ❌

Here’s another one I see all the time…

one account for travel…
another for taxis…
another for ground transportation…

If there are a significant amount of transactions in each, and this distinction is meaningful, go for it.

Otherwise, group them all into one account like travel.

3️⃣ Don't use any personal Information ❌

This one always blows my mind 🤯

Investor names, employee names, and other personal information showing up on the financial statements.

Keep those details in an excel file, and give these people the privacy they deserve by avoiding to share their information on your Chart of Accounts. 

4️⃣ Group Relevant Accounts together ✅

Got an account for Legal Fees, another for Accounting Fees, and another for Recruiting fees?

Group them into a section called Professional Fees, making it easy to see the section totals.

5️⃣ Using numbering ✅

Numbering is a great way to control the order of the accounts shown on your Chart of Accounts…most accounting software will assign alphabetically otherwise.

With numbering, you can also get relevance into what the account relates to based off of a numbering pattern.

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Those are my tips for structuring your chart of accounts!

How do you structure your Chart of Accounts? Let us know in the comments below 👇

PS: Don’t forget to download the free infographic and excel template from the video description below

Build a BEAUTIFUL KPI Dashboard 🤩
Step-by-step guide for creating an engaging excel dashboard (with free template)

Wanna know what my most popular dashboard is?

It’s a KPI Dashboard

I fell in love with this design after my designer and I went back and fourth on the best design…

and ever since, I’ve shared it in almost every presentation

In this video, I show you how you can as well.

Here’s a preview:

STEP 1: OUTLINE YOUR DATA

Before you can create a dashboard, it’s important to outline what exactly things will look like.

This gives you a good starting point for when you then work to make it pretty, and connect your dashboard to your data

I like to shrink cells / rows to give me the maximum flexibility to merge cells where needed

STEP 2: POPULATE WITH DUMMY DATA

Now it’s time to populate your dashboard with dummy data

This gives you the chance to build on your outline, allowing you to understand what information will need to go where

STEP 3: MAKE IT PRETTY

Now it’s time to take your design to the next level.

Don’t skip this part, we are creatures of design!

The key here is to have a cohesive color scheme, allowing you to utilize the customers related to your brand

STEP 3: LINK YOUR DASHBOARD

Your dashboard is starting to come together, but you’ve now gotten to the most important part….linking your data!

The best dashboards are connected to data in a STRUCTURE format. Structure formats allow you to utilize your formulas in a flexible manner without having to worry about blank spaces or inconsistent formulas.

For this dashboard, I utilized XLOOKUP to get my current value vs my prior value

STEP 4: ADD CUSTOM FORMATTING

In many dashboards, you’ll want your data to look one way with text, while leaving the identity of the cell with only numbers.

This allows you to refer to the cell as needed, while keeping it pretty.

Custom formatting works as such:

POSTIIVE VALUE; NEGATIVE VALUE; 0 VALUE

STEP 5: FINALIZE WITH A PRETTY TITLE AND HEADER

You’re almost there! Now you’ll want to give it a pretty title, and date range.

Here, I did a mix of utilizing a text box + merging cells to finalize my design

STEP 6: PRINT YOUR DASHBOARD AND SEND IT

Now comes the best part - show off your work!

Did you know you can copy values in excel, and paste it as a picture?

Simply hit CTRL + C to copy, then navigate to paste special > Paste as picture

You can also hit ALT + H + V + U

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Way to go, your dashboard is complete!

How do you build your dashboards?

Let us know in the comments below, and don’t forget to download the free dashboard via the link in the description of the video below

Taplio

Josh Aharonoff, CPA's Linkedin Analytics