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FYI, this spreadsheet does not use words like income, profit, loss, expenditure, etc. in the same way that businesses and accountants use the terms. Be very car

FYI, this spreadsheet does not use words like income, profit, loss, expenditure, etc. in the same way that businesses and accountants use the terms. Be very careful if you're communicating these numbers to other parties - they may not interpret the words in the same way you intend them. 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.

airstrike 7y ago
> 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...
- lubos 7y ago
  The spreadsheet is not wrong. It's just named incorrectly. It should be called "Income Statement Generator" because that's exactly what it is.
  - hencq 7y ago
    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.
    - lubos 7y ago
      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.
      - hencq 7y ago
        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.
      - hipshaker 7y ago
        In Denmark, anything over 2000 USD has to be depreciated.
    - mdorazio 7y ago
      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.
alexpetralia 7y ago
As they say, cash is king
keerthiko 7y ago
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?
- tedsanders 7y ago
  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_search_asin_title?ie=UTF8&psc=1 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.
formercoder 7y ago
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.
samdung 7y ago
I think you are confusing cash-based accounting (which this spreadsheet is about) from accrual-based accounting (which is what you have described).
paul-gf 7y ago
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-model https://www.graphitefinancial.com/open-source-financial-mode...

airstrike 7y ago

> 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...

lubos 7y ago
The spreadsheet is not wrong. It's just named incorrectly. It should be called "Income Statement Generator" because that's exactly what it is.
- hencq 7y ago
  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.
  - lubos 7y ago
    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.
    - hencq 7y ago
      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.
    - hipshaker 7y ago
      In Denmark, anything over 2000 USD has to be depreciated.
  - mdorazio 7y ago
    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.

alexpetralia 7y ago

As they say, cash is king

keerthiko 7y ago

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?

tedsanders 7y ago
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_search_asin_title?ie=UTF8&psc=1 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.

formercoder 7y ago

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.

samdung 7y ago

I think you are confusing cash-based accounting (which this spreadsheet is about) from accrual-based accounting (which is what you have described).

paul-gf 7y ago

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-model https://www.graphitefinancial.com/open-source-financial-mode...