We’ve all heard the common refrain – CASH IS KING.
It’s a rather ironic statement given that the overwhelming majority of financial statements prepared for small to medium sized business are limited to the Profit & Loss Statement and the Balance Sheet.
Inevitably it means that most business owners have an annual conversation with their accountant – the one where the accountant says . . .
“You’ve made (or lost) $xxx during the year”
and the client responds with . . .
“But where’s the money, because it sure isn’t in my bank account?”
The usual scenario is that the accountant then gives a dissertation – short or long, it really doesn’t matter – with lots of jargon and references back to the financial statements they’ve laboured over.
The usual outcome for the business owner is that their eyes glaze over and they essentially give up.
The meeting finishes and they go back to running the business for another year, none the wiser. Another year has gone by and accounting remains a black art.
The answer to this dilemma is a new approach I’ve developed for the ridiculously complicated Source and Application of Funds Statement that you’ll find in the year-end accounts for large entities. To keep things simple I call it a Cashflow Statement.
In a future blog we’ll look at this statement and what it can do for you. Before that however we need to do a brief refresher on what the standard Profit & Loss Statement and Balance Sheet really mean.
For more information as to how Coughlan Consulting can ‘show you the money’, please contact us.