An In-Depth Look at Financials to Manage Cash Flow
The next articles will guide you through some of the most important financial tools you’ll be working with to manage cash flow.
Types of Financial Statements
From the balance sheet to the income statement to the expense statement to your monthly trial balance, learn why these financial reports reveal information you need to keep cash on hand. Each of these financial tools have different purposes, but they all tie together in the end to show the net worth of your business and how much cash on hand you have available. Learn why it's important to know everything you can about using and reading these financial tools.
Using Financial Statements to Make Cash Decisions
Now that you understand the different types of financial statements, learn more about how each of these are utilized to make business decisions that affect cash flow. For example, if your income and expense statement shows a loss each month, where on that statement can you slash expenses or increase revenues? Or, can you allocate expenses to different departments so your bottom line looks more attractive? Financial accounting knowledge is king in the cash flow world and this post ensures you become an expert on analyzing and making great decisions.
Income and Expense Statements
Find a free template for an income statement along with easy to understand direction on how to prepare an income statement showing all revenues and expenses, eventually showing your profit or loss and cash available at month end. Many business owners rely on hand-prepared general ledgers and often mistakes are made. With this free Microsoft Excel template, which automatically calculates once revenues and expenses are entered, you'll never make a mistake again.
Income Statements vs. Balance Sheets
While the balance sheet is considered a snapshot of your business, the summary totals on your balance sheet are pulled from income statements. The balance sheet may say you have $5,000 in accounts receivables, but how many of those receivables are past due or uncollectible and should be written off? What about aged inventory? Digging deeper into the balance sheet summary totals will show old inventory. Your payables may look low on the balance sheet but can you tell if some are late? Learn here how to effectively use both these tools to dig deeper into your accounts.
General Ledger Template
Another important financial tool is the general ledger where every transaction in your business is posted via debits and credits. Find a free Microsoft Excel template here and tips on how to use it. General ledgers don't have to be a mystery anymore and how they are utilized is easily learned in this how to article. If you don't have an accounting software package, this is a good place to start. Stop using hand-written general ledgers and start using tools to minimize mistakes.
Preparing the General Ledger
Learning how to prepare a general ledger so the right numbers pull to your income and expense statements, which ultimately reveal your profit or loss (and cash on hand) is essential to cash flow management and here, we’ll walk you through how to complete this process. The template is free and we go more in-depth on how to create your general ledger and what should go where. Learn about debits and credits and typical journal entries in this must-read post.
Hidden Secrets of the Trial Balance
Every transaction posted in your general ledger including cash ins and outs are pulled to the trial balance, which is the most asked item of a financial statement by accountants and tax professionals. Find out what it is and what it reveals as far as cash flows. While everything posted in the general ledger pulls to the trial balance, especially in accounting software programs, within the trial balance you can drill in deep to see and correct errors by making adjusting journal entries so you fear the trial balance no more!
Learn How to Prepare a Trial Balance
Now that you know the secrets of the trial balance, here you’ll find tips on how to prepare one, why it must balance and what to do if it doesn’t to ensure everything posted in your general ledger posts correctly to your income and expense statement. What are adjusting journal entries and how do you post them so they affect the trial balance? Is there a difference between a trial balance and an adjusted trial balance? You bet and if you don't know the ins and outs of this important financial tool, don't worry because we explain it here.
These financial tool basics are necessary for creating your ultimate goal—the income and expense statement which reveals your cash in the bank and all available cash. However, what else can you do to help better manage your cash flow?