Where Is All Your Cash?

If you only study your profit and loss statement, you aren't getting
the full picture of your business finances.

“My financial statements show I’m making money, but I don’t have any cash.” We hear this statement all the time from entrepreneurs like yourself. Most assume they should just drastically cut expenses and they’ll be OK. Here’s what you should do instead.

If all you are looking at is the income and expense portions of your financial statement, you are only seeing part of the picture. Your financial statement consists of two parts, the profit and loss and a balance sheet of assets, liabilities, and equity.

The profit and loss portion reports your income and expenses, which all flows into the balance sheet. The balance sheet tracks the changes in the assets, liabilities, and equity. These two separate documents arithmetically prove each other by being in balance. Each is useless without the other.