Springfield, MO

Opinion: Real solutions for cash flow troubles

Bare Bones Business

Posted online

Since 1990, I have reviewed my balance sheet and profit and loss statements on a weekly basis. The balance sheet tells you what you have, what you owe and what you own. The P&L statement shows sales minus expenses and what’s left over, or not. I compare actual versus budgeted – in other words, what I have versus what I want.

I adjust my behavior, engage the team, and we have fun making more money. Once a month, we “close” the accounting and make sure the t’s are crossed and the i’s dotted, using a month’s end procedures checklist. This approach has made me a wealthy woman.

Recently, an accountant friend reintroduced me to cash flow reporting. Have you ever wondered, “My P&L shows I have a profit. However, that number doesn’t match what I show for cash on the balance sheet. What’s up with that?”

The cash flow report shows you, quite literally, where the cash went.

Knowing where the cash goes is helpful. You can take it a step further by budgeting, and predicting, what your cash inflow and outgo will be. This is a very interesting exercise if you have regular transactions that involve accounts that are on the balance sheet and not the P&L.

For example …

• You have a significant amount of debt. Debt can dry up your cash. When you repay the principal on your debt, that repayment doesn’t show up as an expense on the P&L. The interest portion does, but not the principal portion.

• You have a lot of accounts receivable. If your business requires a bit of lag between the sale and the payment, you know cash flow can get tight.

• You have made, or are planning to make, some large asset purchases. If you write a check for a piece of equipment, that purchase will show up as an asset, not an expense. Cash is affected, but the transaction doesn’t show up on the P&L.

Find and run the cash flow statement in QuickBooks, or whatever you are using for your accounting software. Discover where the cash is going. Project what cash will look like given your plans for the end of this year and in 2018.

Profits are terrific; cash is king. Profits collected in cash will fix just about any financial challenge. Explore cash management and add it to your month’s end procedures checklist. This can have a huge impact on your business – and stress levels.

Cash flow reporting also may encourage you to raise your prices. If you need more cash, a price increase can be an easy fix.

Mathematically, if you raise prices and all other expenses stay the same, every dollar of that price increase flows to profit. For example, let’s say you are at about break-even for 2017, zero profit. If you raise your prices by 20 percent and all other variables stay the same, those additional sales dollars will increase your bottom line by 20 percent. You could raise your prices 10, 20 or 30 percent. That would help, right?

Just saying.

Ellen Rohr is an author and business consultant offering profit-building tips, trending business blogs and online workshops at Her books include “Where Did the Money Go?” and “The Bare Bones Weekend Biz Plan.” She can be reached at


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