Where the Hell Is My Cash - Part 2

"80% of small businesses don't make it to their 5 year anniversary and a great majority fail even though they make a profit. They fail because they run out of cash." 

- Rick Wallace

As a follow up to last week's blog I wanted to offer the first in a series of solutions to the age old problem of determining where the cash went. We look at the P&L and see we made a profit but when we go to write a check, there is little or no money in the bank account. Where the hell did the cash go?

The P&L is an accounting document that is developed with accounting principles geared to the rules of the IRS. It is a valuable and very informative document, but it does not show us what is happening to the cash.

Every accounting package has a report called the "Statement of Cash Flow" - a document that at the bottom tells you whether you are cash flow positive or negative, over a given period of time, and how much cash you should have on hand at that moment.

Here is a short 6 minute video that introduces you to this document:

https://youtu.be/G9-MxUTCyyM

Every time you look at your P&L, look at this report and you can begin to understand and use this document to see how cash is flowing in and out of the company.

Remember you can show a profit on your P&L and go out of business because you have no cash.