Alex MilsteinComment

TIPS FOR KNOWING YOUR CASH POSITION

Alex MilsteinComment
TIPS FOR KNOWING YOUR CASH POSITION

High Point seminar sheds light on need-to-know financial terms 

How do you manage your cash flow? How do you determine what’s profit and what needs to be paid to a vendor? How do you read a balance sheet? 

These were all questions addressed by Kimberly Merlitti, owner of KMM Consulting, during a seminar put on by interior design tech company Ivy during High Point Market. 

KMM Consulting is a Washington, D.C.-based firm focused on helping luxury interior design, construction and architectural firms be as profitable as possible. In the presentation “Knowing your Cash Position,” Kimberly touched on different financial terms, what they mean, and how to help interior designers know their business better.  

Here are a few of the key points from the seminar:

  1. Balance Sheets. Simply put, a balance sheet reports a company’s monthly assets, liabilities and equity at a single moment in time.

    An asset is a resource with economic value that a company owns or controls with the expectation that it will provide future benefit. Liability is a company’s legal debt or obligation that arises during the course of a business operation, and they’re settled over time through the transfer of money, goods or services. Examples of liabilities include credit cards, sales tax, loans and line of credits. Kimberly says you should be able to pay for these liabilities at any given time with your cash on hand.

    Equity is the amount of the funds contributed by the owners plus the retained earnings (or losses). This is also referred to a shareholder’s equity.  

  2. Vendor Liabilities. Vendor liabilities/works in progress are goods in production that have not yet been completed. This includes any amounts still owed to vendors before the final product has been completed. 

  3. Overhead Costs. These are costs that refer to all ongoing business expenses. Overhead must be paid for on an ongoing basis, regardless of whether a company is doing a high or low volume of business. Kimberly stressed that overhead costs are not project costs, and examples of overhead expenses includes payroll, rent and insurance.  

  4. Capital Expenditures. Capital expenditures include things like marketing/advertising, show houses, new computers, furniture for the office and inventory. Kimberly says these purchases should be made only when you have enough cash on hand to do so. As an example, she said that you would not want to commit to a showcase house unless you know you have enough cash on hand to pay your vendors and your payroll.

In conclusion, Kimberly ended the session by giving this piece of advice: It’s good to have a bookkeeper who knows how to do all your finances, but it’s still important for you as an interior design to know what’s going on in your business.