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How to understand your balance sheet: A beginner’s guide

How to understand your balance sheet: A beginner’s guide

A balance sheet is a financial statement that provides an overview of the company’s assets, liabilities, and equity at a specific point in time. It is important to know what each one means in order to understand how well you’re doing. It can be difficult to understand all the information on this document, but there are ways to break it down into more manageable pieces.


What is a balance sheet?

The balance sheet is a financial statement that provides information about the assets, liabilities, and equity of a company.

The first section of the balance sheet lists the assets on hand. Assets are anything that can be turned into cash. Assets include cash, accounts receivable (money owed to you), inventory (goods waiting to be sold), and prepaid expenses (e.g., insurance that is paid annually in advance). Assets are usually broken up into short-term (less than one year) and long-term (one year and longer)

The second part lists liabilities, which are things you owe money for. Liabilities include loans payable or due for goods purchased on credit. Like assets, liabilities are usually broken up into short-term and long-term.

Finally, equity is calculated by subtracting what you owe from what you own. This is also referred to as net worth or the net value of the business.


The importance of the balance sheet

Balance sheets are a snapshot of what a company’s assets, liabilities, and equity look like at any given point in time. A balance sheet is a tool that can be used to find out if a company has enough money to cover its obligations and stay afloat or enough assets to cover its long term obligations.

The balance sheet can also be used to determine how a company is financing its operations. A company that is generating enough net income will have higher retained earnings from one year to the next. A company that is financed through debt will have an increase in long-term liabilities year-over-year.


How to read a balance sheet

Below is an example of a balance sheet.

balance sheet

We already explained assets, liabilities, and stockholder’s equity. The balance sheet must always “balance” because assets equal liabilities plus equity (known as the accounting equation). Understanding this equation helps you understand a company’s position. If the company has more liabilities than assets, then it will have negative equity, which is a potential major red flag especially with mature businesses.

Investors and creditors like to determine a company’s financial health using something called ratio analysis. To determine how liquid a company is, divide current assets by current liabilities. In the example above, 67,500 / 34,200 = 1.92. Whether that is good or bad depends on the industry. In general, anything near or over 2.00 is acceptable.

Other performance indicators include solvency ratios (also called financial leverage ratios), profitability ratios, efficiency ratios, and coverage ratios. Corporations also have market prospect ratios which are used to predict performance, which is imperative when valuing a company’s stock price.


How to use information from the balance sheet to improve your finances

Did you know the information found on a balance sheet can also be used to measure your company’s vulnerability to risk? A complete balance sheet includes key pieces of information like cash on hand, accounts receivable and inventory. By analyzing these numbers, you will be able to see where your business is strong or weak in relation to other companies in similar industries. If there are any areas for improvement (i.e., too much debt), it will allow you time to prepare so that when the unexpected happens.

If you want to take control of your finances and improve them, the balance sheet is a good place to start. Understanding what it includes and how to read one will provide insight into where you can make changes in order to get more money for yourself or avoid unnecessary expenses that are taking too much from your paycheck.

The best way to use this information is by comparing two different months side-by-side on paper so that you have everything at hand. Once you have done this, focus on adjusting only those areas which seem most important – like lowering debt payments or reducing inventory on hand – and see if there is an impact in your bottom line!

The balance sheet is a powerful financial tool that can be used to improve your finances. It’s important for you to understand how the information on the balance sheet works and what it means in order to make informed decisions about improving your money management skills. Let us know if we can help! Contact our team of experts today and let them show you how they have helped others grow their wealth with remarkably simple math.

Financial Forecasting 101

Financial Forecasting 101

If you’re a business owner or been thinking about opening up a new venture, the thought of improving its performance must have crossed your mind. And that’s where financial forecasting comes into play. 

It’s simply the process of looking into the future of your business based on historical data and trends. In this post, you’re going to learn the basics of financial forecasting and how it can help you.  

What is Financial Forecasting?

The definition is literally in the name. Financial forecasting is forecasting a business’s financial status. 

More specifically, this is the processing, predicting, and estimating the future performance of a business based on current data at hand. Company revenue is used as the benchmark in most basic cases. 

The sales figure can say a lot more than how much profit your business made. Those data sheets are effectively a portal to your business’s future. But it takes a different set of capable eyes to capture the essence. 

Apart from the current sales figures, historical data is also used in financial forecasting. It helps analyze the performance with regards to the past, present, and hopefully a better future. This method is widely used by successful CEOs and entrepreneurs around the world for its accuracy. 

Why is Financial Forecasting Important?

Any business with long-term objectives can definitely benefit from this process. It also helps to set new standards for the business as well as guide the decision-making process. 

Another very important reason why entrepreneurs use this process is to convince investors. 

Suppose, you own a winery and you wish to expand across different states. You know it will be a successful venture. But how do you attract more investors? 

That’s where financial forecasting comes to play. You can accurately determine the future of your winery by considering all the variables in your current model and projecting them into a future scenario. 

CEOs love this model because it can bring important insights such as how to spend business resources, what the industry holds for the future, how long the debts will hover over the business, how to pay the shareholders, etc. to light. 

And when you have at least an idea of what you’re diving into, making the right decisions at the right time becomes a lot less burdening to your shoulders. 

Types of Financial Forecasting

When venturing into the dynamic world of forecasting, you should know about the types as well. There are two major branches of forecasts. One is Qualitative while the other one is Quantitative. 

Qualitative Forecasts 

Qualitative financial forecasting does not rely on computers to analyze large data sets. It’s quite an unorthodox way of finding out the connection between events. Rather than following the sales figures, Qualitative Forecasts focus on decisions taken from experience and intuition. 

It starts with gathering opinions from major positions in each department. Analyzing their insights might be crucial for forecasting.

The next step might be taking a similar scenario from a different environment and projecting it onto the subject scenario. 

The Delphi Method is another important aspect of financial forecasting. It indicates that company professionals fill out a questionnaire. Based on it, another questionnaire is created and filled. Now, these are combined and presented to the participants to re-evaluate their answers. 

Scenario forecasting is another great method. The person tasked with the forecasting will project different results based on the consequence of scenarios. Your management team has the freedom to select any result you want. 

Quantitative Forecasts 

Unlike qualitative forecasts, quantitative financial forecasts solely depend on large historical data sets. These are used to find patterns and trends in the business space. These forecasts are more accurate in sectors where numbers speak louder than legacy. 

Pro-Forma Financial Statements is a great method used in this forecast where the sales data from the previous years are used to make the prediction. 

Another method is Time Series Analysis. For short-term goals and objectives, this the perfect method to use. It involves collecting data for a certain period and analyze it to find trends. 

Lastly, the Cause-Effect method dictates that every effect on the business is related to the cause. The consumer’s income, their confidence in the business, unemployment rate, etc. directly influences the sales figures. The goal of this method is to find the connection.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Protea Conversations – Rachel Martin

Protea Conversations – Rachel Martin

Protea Financial was founded in 2014 to provide high quality out-sourced accounting at an affordable price.  Given Protea’s flexible work environment, the Company especially appealed to accountants who wanted to re-enter the work force after taking time off to start a family. This allowed Protea to attract extremely talented individuals who were overlooked.  Over 80% of both Protea’s leadership and accounting teams are women.

We selected the name Protea because is the national flower of South Africa and is a symbol of our connection. The Protea flower has become an ornamental flower because of this striking beauty and is included in arrangements and bouquets as a symbol of courage or daring to be better or a sign of positive transformation.

Protea Conversations focuses on successful woman in business and their achievements.  The hope is that these conversations will create a forum to discuss the experiences, opportunities, and challenges women face, and how we can build a more diverse, inclusive, and successful environment for everyone.

In April 2021 we spend time with Rachel Martin. A unique combination of education and experience brought Rachel Martin to launch Oceano Wines with husband and co-proprietor, Kurt Deutsch in 2016. A Virginia native, Martin was present at the inception of what is now considered one of that state’s premier wine producers, Boxwood Estate Winery, in 2005. As Executive Vice President of Winery Operations, Martin’s job was to oversee all facets of production, sales and marketing of Boxwood’s award-winning whites, rosés and Bordeaux-style red blends.

Appreciating the distinctiveness of Middleburg’s terroir, Rachel spearheaded the move toward securing a coveted American Viticultural Area designation from the Alcohol and Tobacco Tax and Trade Bureau, the federal agency charged with evaluating the merits of all such applications. The petition she authored on behalf of the region was approved in 2012, making Middleburg Virginia the state’s seventh AVA.

Rachel’s forward thinking led directly to Middleburg having its own wine identity separate from the more generic Virginia designation, making her well suited to again start from scratch with Oceano Wines. None other than the esteemed author Jancis Robinson noted Rachel’s marketing savvy in her book “American Wine.”

Rachel is a member of Les Dames d’Escoffier International New York and Washington, D.C chapters and was the first woman to be inducted into the District of Columbia chapter of the International Wine & Food Society. Rachel was a founding board member of the Middleburg Film Festival where she was closely involved with the beverage/culinary. 

How did you get into the wine industry and why did you decide to start Oceano Wines?

My path to the wine industry began in 2002. It was my step-father’s awesome and somewhat crazy idea to plant a world class vineyard and build a state of the art winery in Middleburg, Virginia- Boxwood Estate Winery. My position would be Executive VP in charge of all operations, so in advance I attended the Diploma program at the University of Bordeaux’s School in Enology in Bordeaux, France and studied Enology and Viticulture at Napa Valley College in Napa, California.

In 2016, while still a Boxwood, I visited Spanish Springs Vineyard just east of Pismo Beach on the extreme coast of San Luis Obispo County, California. I was so intensely struck by the vineyard terroir to produce unforgettable Burgundian varieties, I immediately contracted for 6 tons of Chardonnay. We hired industry veteran winemaker Marbue Marke to craft our first vintage in 2016. That was the first step in establishing Oceano Wines with my husband and business partner, Kurt Deutsch. And in 2018 we added Pinot Noir to our offerings. Our wines are made by Marbue in Napa.


What has been the biggest challenge you have experienced in reaching your current success (personally and professionally)?

Since I feel like I have had two lives professionally in wine, I can speak to both challenges in each life. At Boxwood Winery, my biggest challenge, personally was working for my step-father. He is very old-school when it comes to business, and it could be soul crushing at times. That said, I am incredibly grateful for the opportunity that he gave to me as Executive VP of his promising winery. That was the start of my life in wine. Professionally, I was challenged at every level. I had been responsible for logistics and creative projects in the past, but nothing of this magnitude. I had to learn all facets of the business by the seat of my pants. The only industry mentor that I had was our viticultural consultant, Lucie Morton. That was amazing, but I was responsible for much more than that. I had to grow in every direction to meet the requirements to run winery operations, sales and marketing. It was a huge job, but very satisfying!

With Oceano Wines, there are not any personal challenges. It is like breathing, because I am literally living my best life. I am at my happiest when I am creating. We are sourcing from an incredible vineyard site, Spanish Springs, which is owned by our family friend Henry Warshaw. I am privileged to work with our winemaker, Marbue Marke. He is highly experienced, down to earth, professional and most importantly, expertly skilled as a winemaker and a viticulturist.

Professionally, since we are sourcing fruit from the extreme coast of San Luis Obispo County, making our wines in Napa as a client and I am based in New York City, we have not yet been able to establish a tasting room. This is the greatest challenge. We are looking into options on the east coast. Hopefully we will find the right opportunity in 2021. Right now, our wines can be purchased from our website and at restaurants and retailers in California, New York, New Jersey, Delaware, Maryland, Virginia, Washington, D.C., North Carolina and Florida.


What are your short term goals of your career/business and yourself?

Short term goals for business is getting our tasting room situation figured out and open in 2021. For myself, my goal is to continue my role as a leader and mentor in the alcohol beverage industry, by bring valuable content and support to my member associations: Women of the Vines & Spirits and Les Dames d’Escoffier.


What is the best piece of advice you have ever received that has helped you in your success?

Not everyone is going to like you, and that is okay.


What is the piece of advice that you wished you had gotten when you were starting out?

Approach people by what you can do for them, not what they can do for you.


What advice you give to others to help them be better leaders?

Cultivate and nourish your employees, they are your greatest asset.


As a thank you to our interview and Protea’s commitment to more diverse and inclusive leaders, Protea will make a donation to Vital Voices (https://www.vitalvoices.org/). Vital Voices Global Partnership is a global movement that invests in women leaders who are solving the world’s greatest challenges. They are “venture catalysts,” identifying those with a daring vision for change and partnering with them to make that vision a reality. They scale and accelerate impact through long term investments to expand skills, connections, capacity, and visibility. Over the last 22 years, we have built a network of 18,000 change-makers across 182 countries who are collectively daring to reimagine a more equitable world for all.

5 Financial Reports You Should be Running

5 Financial Reports You Should be Running

There’s an assortment of financial reports involved in business accounting and bookkeeping. Each one contains the information you need to form an accurate and holistic view of your company’s financial health. There are five reports you should be running on a consistent schedule when you own any small business, especially wineries. Keep reading to learn why these reports are crucial to the success of your company.


Profit and loss

A profit and loss report, also called a statement of operations, provides an overview of your winery’s key performance factors. The frequency of P&L reporting varies – monthly, quarterly, and annual statements all have their place. The goal of P&L reporting is to track sale trends and profit ratios over time.

To complete the report, an accountant compares the income of your business against all sorts of expenses. These include how much it costs to sell your products, admin expenses, taxes, interest on loans, marketing budgets, and so on. The sum of your business expenses is then deducted from the sales revenue to determine your company’s net income.

It’s important to collect and review these reports over time. On report is a snapshot in time. Several forms a dynamic assessment of how well a business is doing. This data is invaluable if you want your small business to thrive for years to come.


Balance sheet

The process of fermenting, bottling, and selling wins is lengthy. Every winery depends on a mix of liquid accounts and long-term investments to support such time-consuming operations. A winery is also likely to have short-term and long-term liabilities and financial backing from shareholders.

These factors are tabulated and compared when your accountant prepares a balance sheet. You’ll find that there are two sections to any balance sheet: one, a summary and breakdown of all company assets, and two, a summary and breakdown of all company liabilities.

The assets section will include the cash you have to spend, the value of your inventory, the equipment you own, and any accounts receivable on your books. The liability section includes accounts payable, unearned revenue, and long-term debts. The final calculations reveal your company’s net worth. Reviewing yearly balance sheets is an excellent tool to track the growth of your winery.


Statement of cash flow

The revenues and expenses of a business fluctuate frequently. And while P&L reports and balance sheets provide immense data sets, they don’t always offer the precision you need. A statement of cash flow allows you to record, track, and predict the actual amount of cash your business has on hand during a given time period.

For example, a winery needs to invest money in multiple pieces of bottling equipment. The cost of the initial purchase, interest owed, and the depreciation of value are all accounted for in monthly expense reports. However, the depreciating value of machinery doesn’t actually remove money from your account.

Instead, a cash flow statement only tracks your liquid assets. Regular cash flow reporting will show you the amount of cash you have on hand throughout each week, month, or quarter. Wineries can use these reports to predict how much cash they’ll have at a future point and enables them to make long-term plans.


Net profit margin over time

The net profit margin of your company is crucial to seeing and developing success in the long term. The basis for this type of report is the net profit margin ratio. The ratio divides your business’s net profit by the amount of revenue earned. To phrase it another way, this report explains how much your net worth grows with every dollar of revenue you earn.

A net profit margin report should be completed frequently. It provides an inside look at how effective your investments in inventory and labor are at producing money from your company. Knowing the profit margins for your company is the first step to course correction when you start losing money.


Accounts receivable versus accounts payable

Reporting accounts receivable versus payable is vital for daily operations and long-term financial planning. These types of reports document either your liabilities or your assets in real time. This information is needed to pay debts on time, budget for upcoming expenses, and ensure your books are accurate as well.

Accounts receivable reports detail outstanding money that your business is owed. In a winery setting, you might have receivable assets because a local market purchased several cases of wine to stock their shelves. Payable accounts are liabilities you are expected to pay. This includes expenses like rental space and raw goods inventory.



These five reports are the pillars of your business’s financial health. They require the utmost accuracy and need to be completed on a frequent basis, which is why Protea Financial can help. As a small business owner, it’s difficult to find time to manage all accounting and bookkeeping. Compiling and reviewing reports on a regular schedule is a challenge.

Additionally, few business owners have the training and expertise required to prepare reports correctly. Protea’s certified accountants and bookkeepers are ready to help. Your dedicated team will ensure that every transaction, asset, and liability is accurately reported. This means you can focus your attention on reviewing the big picture and deciding how best to grow your business.

7 thoughts for 7 years

7 thoughts for 7 years

In the month of March we as a company, Protea Financial, are celebrating seven years of guiding small businesses with high quality and cost-effective accounting. This is truly a surreal moment for us here at Protea Financial, as we celebrate our success. What started out as a mere extension of a business has since morphed and grown into something much bigger – the dream of better accounting for everyone. With this milestone front of mind, I have been taking time to reflect on the journey and I want to share my seven key/favorite/most important moments in the journey so far.

Getting our first real client

We had been operating for a couple of weeks focusing on a couple of entities run by my business partners, then we received a call from a winery in the Napa Valley. It was a really high profile, well-known winery.

Though the client did not last very long, it did provide me with insight into who we should be. The experience with this client made it clear that we would focus on bookkeeping for the wine industry and that we were going to operate remotely. The time with the client was not a success but the learning on the client set us up for who we are today.

Setting up our subsidiary in South Africa

After nine months of working with contractors and paying them hourly we made the move to open a company in South Africa and hire some “real” employees.

This was massive! One, it meant we have a real business, with a real concept but mostly importantly it also meant that I was no longer able to worry about just myself. Every decision I make, every action I take, did not just affect my life but it had an effect on other people’s lives and livelihood.

This really was the moment that I realized it would not be enough to just be a good accountant but I needed to step up and be a manager and a leader.

As a 30 year old in a new country, it set a fire inside me to bring my beliefs in what good accounting is to life!

Making a hire in US

Honestly one of the scariest moments in the journey to date!

We had been in business for a few years and I needed help. We had grown beyond my ability to provide the quality of service we wanted to be known for to our clients by myself. In the tricky and competitive hiring market of the North Bay we not only needed to find someone who wanted to provide bookkeeping services but also work at home by themselves with a Team in a different country.

We went through a couple of options that just did not work out. This was less than ideal, but we learned from these trials who we are, and what we can offer. Today we have four fantastic Team members in the North Bay. Hiring them would not have been possible without the learnings from the first few attempts.

Hiring a new manager in South Africa

There was a major learning curve when we started out. I had managed teams in high pressure environments, but nothing I had learnt prepared me for managing a high performing Team on a different continent in a fluid business.

In a tough decision I needed to hire in above the Team I had in place. This is something I never wanted to do, I’m a believer in development of your own talent, but it needed to be done. What made this decision even tougher was my current manager was a great friend. I had no choice though. I needed help. I needed someone who could manage the Team and deal with admin to allow me to concentrate on strategy, client experience and growth. I needed someone that would be tough, direct and could execute on my vision.

I was lucky enough to stumble onto Sonja. Coming in from a less than traditional background, Sonja was exactly what we needed. Sonja quickly became my right-hand person, allowing me and the business to thrive. The right person at the right time!

5 year celebrations

What a special time! I was able to go down to South Africa with my family and business partners and enjoy a wonderful celebration. If you follow us on Facebook you will know we love to celebrate and this one was the best. It was nice to celebrate a great milestone and take the time to connect and think about the future.

It was also an opportunity to thank so many people involved in our success. It was wonderful to take time to say thank you.

Giving back

Giving back is core to who we are at Protea. As part of the business plan it was really important to me to find time and resources to be able to give back to those in the community and especially to help those that they are unable to help themselves.

Over the years, we have helped out at animal shelters, supported sterilization of animals, supported children’s homes, supported women’s shelters and supported people who need food.

Giving back motivates me to work harder every single day to be able to help. Looking back at how we have been able to support others over the last seven years makes me happy.

This very moment

This month. This day. This very moment.

The idea that I have even have this opportunity to celebrate success of seven years in business seemed like something of someone else’s dreams on day one.

I am so fortunate for this opportunity. The opportunity to lead. The opportunity to help. The opportunity to add value and be a part of many journeys of success. I am so proud of the way we have been able to help so many people, especially in the last 12 months that have been crazy difficult.

Thank you to our supporters. Thank you to our clients. Thank you to the Team! You are all amazing and none of this would be possible without you.

We will continue to strive to be better every single day. We will continue to focus on better accounting for everyone.