McGraw-Hill/Irwin 14-1 © 2006 The McGraw-Hill Companies, Inc All rights reserved Chapter 14 Budgeting And Controlling Operations And Taxes Small Business Control Types Of Budgets Obtaining Information & Ratios Taxes & Tax System Record Keeping & Tax Reporting Factors/Problems In Getting Credit Photodisc Collection/Getty Images 14-2 Control “…the process of ensuring that organizational goals are achieved.” McGraw-Hill/Irwin 14-3 © 2006 The McGraw-Hill Companies, Inc All rights reserved Control Process Setup Standards Measure Performance Actual vs Planned Deviations Excessive? Take Corrective Action McGraw-Hill/Irwin 14-4 © 2006 The McGraw-Hill Companies, Inc All rights reserved Set Standards Units Consumer/Produced Standard Hours Per Unit Miles Per Gallon Price Paid/Charged- Price Per Unit Requires Intuition Past Performance Measurement Comparison Communication McGraw-Hill/Irwin Keith Brofsky/Getty Images 14-5 © 2006 The McGraw-Hill Companies, Inc All rights reserved Effective Controls Timely Cost Effective Accurate Quantifiable Measurable Indicate Cause/Effect Responsibility Acceptable McGraw-Hill/Irwin PhotoDisc Imaging/Getty Images 14-6 © 2006 The McGraw-Hill Companies, Inc All rights reserved Budget “…a detailed statement of financial results expected for a given future period.” McGraw-Hill/Irwin 14-7 © 2006 The McGraw-Hill Companies, Inc All rights reserved Types Of Budgets Capital Operating Cash Flow McGraw-Hill/Irwin Steve Cole/Getty Images 14-8 © 2006 The McGraw-Hill Companies, Inc All rights reserved Operating Budget •Sales •Production •Personnel McGraw-Hill/Irwin Royalty-Free/CORBIS 14-9 © 2006 The McGraw-Hill Companies, Inc All rights reserved Cash Flow Budget Plan Daily/Weekly Cash Needs Plan Monthly Cash Needs Prepare For Cash Flow Crisis • Establish/Maintain Good Credit • Set Aside Funds To Earn Interest • Schedule Payments • Keep Fixed Costs Low & Tie Variable Costs To Revenue McGraw-Hill/Irwin 14-10 © 2006 The McGraw-Hill Companies, Inc All rights reserved Business Assets? Collection Period Net Sales To Inventory (Inventory Turnover) Net Sales To Working Capital McGraw-Hill/Irwin Royalty-Free/CORBIS 14-25 © 2006 The McGraw-Hill Companies, Inc All rights reserved Equity Satisfactory? Long-Term Liabilities To Working Capital Debt To Owners’ Equity Current Liabilities To Owners’ Equity Fixed Assets To Owners’ Equity McGraw-Hill/Irwin 14-26 © 2006 The McGraw-Hill Companies, Inc All rights reserved U.S Tax System Determines Taxes & Who Will Pay Collection Of Taxes Internal Revenue Servicewww.irs.ustreas.gov McGraw-Hill/Irwin 14-27 © 2006 The McGraw-Hill Companies, Inc All rights reserved Taxes Indirect Direct McGraw-Hill/Irwin 14-28 © 2006 The McGraw-Hill Companies, Inc All rights reserved Selected Direct Taxes McGraw-Hill/Irwin 14-29 © 2006 The McGraw-Hill Companies, Inc All rights reserved Tax Effects Income Tax On Profits Employer Withhold/Match Owner Personal Taxes Transfer Of Ownership Business Decisions Government Administrative Cost Of Collection McGraw-Hill/Irwin 14-30 © 2006 The McGraw-Hill Companies, Inc All rights reserved Types Of Taxes Excise/Intangible Property Sales & Use Federal, State, & Local Income McGraw-Hill/Irwin S Meltzer/PhotoLink/Getty Images 14-31 © 2006 The McGraw-Hill Companies, Inc All rights reserved Licenses, Permits & Registrations Federal Business License Employer’s Federal Tax ID Number Mailing Permits State Incorporation/Partnership Trade Name Registration Professional Registrations Royalty-Free/CORBIS City/County Zoning Permits Building Permits McGraw-Hill/Irwin 14-32 © 2006 The McGraw-Hill Companies, Inc All rights reserved Taxable Income “…total revenues minus deductible expenses.” McGraw-Hill/Irwin 14-33 © 2006 The McGraw-Hill Companies, Inc All rights reserved Deductible Expenses Cost Of Goods Sold Selling PhotoDisc/Getty Images Administrative McGraw-Hill/Irwin 14-34 © 2006 The McGraw-Hill Companies, Inc All rights reserved Cost of Goods Sold & Inventory Valuation First-In, First-Out (FIFO) Last-In, First-Out (LIFO) Average Cost McGraw-Hill/Irwin Kim Steele/Getty Images 14-35 © 2006 The McGraw-Hill Companies, Inc All rights reserved Employment-Related Taxes Income Tax Withholding Social Security/Medicare Unemployment Compensation Federal Administration State Workers’ Compensation McGraw-Hill/Irwin 14-36 © 2006 The McGraw-Hill Companies, Inc All rights reserved Owners’ Personal Taxes Salaries & Bonuses Withdrawn From Company Dividends Contract For Business Sale Noncompete Clause Seller Warranties & Representations Purchase Price Retro Americana McGraw-Hill/Irwin 14-37 © 2006 The McGraw-Hill Companies, Inc All rights reserved Credit Management Decide Method Of Customer Payment Cash Check/Debit Credit Set Credit Policies & Practices Administer Credit Operations Jack Star/PhotoLink/Getty Images McGraw-Hill/Irwin 14-38 © 2006 The McGraw-Hill Companies, Inc All rights reserved Credit vs Debit Card Use McGraw-Hill/Irwin 14-39 © 2006 The McGraw-Hill Companies, Inc All rights reserved ...Chapter 14 Budgeting And Controlling Operations And Taxes Small Business Control Types Of Budgets Obtaining Information & Ratios Taxes & Tax System Record... Working Capital McGraw-Hill/Irwin 14-24 © 2006 The McGraw-Hill Companies, Inc All rights reserved Business Assets? Collection Period Net Sales To Inventory (Inventory Turnover) Net Sales To Working... Effects Income Tax On Profits Employer Withhold/Match Owner Personal Taxes Transfer Of Ownership Business Decisions Government Administrative Cost Of Collection McGraw-Hill/Irwin 14-30 © 2006