you have a computerized inventory system that can tell you how much inventory you have at any time, its a good idea to take a physical inventory every six or twelve months to reconcile the real inventory with the computer inventory. Once you have a complete listing of the description and count of all the goods in your store at a particular date, then you apply the best figures you have for what the merchandise cost you when you bought. Multiplying the unit cost of each item on your shelves by the number of items you have and adding purchases during the period gives you the cost of the goods available for sale. While there are a number of different theories on which cost figure to use (the latest or the earliest), the critical thing is to make sure you do it the same way every time. Then, you can make accurate comparisons from year to year. Of course, if you have a service business or business with no inventory, the inventory valuation discussion is moot.     After you have developed a total dollar value of the goods you have on hand, you can calculate your real cost of sales this way:     1. Add together the goods you purchased during the period and the inventory amount at the beginning of the period. (This total represents the dollar value of the goods you had available to sell during the period.)     2.From that amount, subtract the dollar value of the inventory at the end of the period. 3.The difference is the cost of sales for the period. Heres an example that demonstrates how you do this:     This calculation has more use than merely filling out IRS forms: It can let you know when someone is stealing from you. Suppose you have a good estimate of what the cost of sales percentage should be, either from past statements or from a good understanding of your business. Suppose further that you expect a cost of sales of 61.5% and that you actually had a cost of sales of 77.3%. What does that mean? It could mean that some of the merchandise you buy for resale is leaving the store without any money entering your register. At any rate, it means that you need to do some serious research to find out what is really happening. Chapter 7: Your Cash Flow Forecast and Capital Spending Plan     Overview     Quick Plan. If youve chosen the quick plan method to prepare a business plan (see A. Introduction     In you drafted your estimated Profit and Loss Forecast. While it tells you a lot about the big financial picture, it leaves you ignorant of many details. If you overlook one critical detail, you may go broke, even though your business seems profitable viewed from afar.     The crucial detail a business owner must manage is called "cash flow." Cash flow is another term for the money coming into and going out of your business. Positive cash flow occurs when the money coming into your business exceeds the money flowing out, and negative cash flow is the opposite. In the day-to-day world of starting and operating your business, you will be at least as concerned about short-term cash flow as you will be about long-term profitability. After all, you dont want your creditors to sue you because you cant pay your bills even though your sales are increasing rapidly. One new business owner I know even wears a T-shirt that says: "Happiness is