If Cash is King…The Cash Flow Statement is His Wife

In a good marriage the husband and wife have good communication; understand one another’s character, and a good understanding of who rules the house.

If you are going to have a successful business today you had better make sure the marriage between your cash and the cash flow statement has not filed for divorce. In other words, you need to understand how money is flowing through your organization and the impact on operations. Basically, how they are talking to one another. If not, lack of good communication can cause the house to crumple and your only customers are lawyers.

It doesn’t matter the size of your organization make sure you know the exact profit for your organization and if it has already been allocated. Owners should know the true character of transactions – is money actually flowing into the business or is it just a paper entry. (Ex. Change in Accounts Receivable.) This will give you a clear path to plan for the future and make necessary adjustments.

Lastly, it is not the balance in your checkbook but the balance at the bottom of the cash flow statement that truly rules the house.