How To Use Four Standard Accounting Documents To Find Out Where All The Money In Your Business Went…
Hey – you want to know a obvious secret?
If you take a beginning period balance, line it up with the P&L for the period, then next to the cashflow for the period – then you can follow the changes the transactions in the end of period balance sheet!
So what?
This means that if your balance sheet is properly set up – and for example you make a $300k profit – then you can use these four documents to see WHERE YOUR PROFITS WENT!!! (Or – how you have financed for your losses if you don’t have a good coach?)
If you ever wondered where all the money disappears to – this is the answer. I apologise that it involves accounting – but accounting done right can be pretty darned exciting…
I estimate that less than 1% of small to medium businesses use these tools – and I believe the businesses that do not fail (the majority fail) – are the ones that know their numbers including where the cash went, and where it will go in the future.
Businesses go out of business because they run out of money – understanding cashflow needs to be on the examination you must pass before you can open a business. No, wait on. That compulsory training and examination does not exist…
I wonder why up to 90% of businesses fail in the first couple of years?
And I wonder how many accountants or bookkeepers would have the skill and understanding to do the analysis above and show you where the money went in your business?
How many accountants and bookkeepers insist their clients have and use a cashflow forecasting tool?
Judging by the business failure rates (in all parts of the world) – the answer to these questions is “Very, very few.”
You can download my Cashflow Forecasting Tool Excel Spreadsheet free by joining my Newsletter list at seminar.com.au – it is in the right hand column.
Might be time to update that photo too – was taken at the start of my business coaching career about a dozen years ago…