11/08/2024
Picture a lake.๐ A big, beautiful mountain lake. ๐
This particular lake stays full because 3 rivers flow into it.
Now - how do you measure which river fills the lake the most?
๐๐ฎ๐๐ - ๐๐ผ๐ ๐ฟ๐๐ป ๐ฎ ๐ฐ๐ฎ๐๐ต ๐ณ๐น๐ผ๐ ๐ฟ๐ฒ๐ฝ๐ผ๐ฟ๐! ๐ฒ
OK, so maybe that technique doesnโt work for mountain lake water-flow. ๐ง
But it DOES work for your business cash-flow. ๐ต
And, just like that mountain lake, your business has 3 โriversโ of money flowing in:
๐๐ฅ๐ถ๐๐ฒ๐ฟ ๐ญ: ๐ข๐ฝ๐ฒ๐ฟ๐ฎ๐๐ถ๐ป๐ด
This is the money you make from selling your products and services.
๐๐ฅ๐ถ๐๐ฒ๐ฟ ๐ฎ: ๐๐ป๐๐ฒ๐๐๐บ๐ฒ๐ป๐๐
This is the money your company makes from purchasing equipment or investing in other companies.
๐๐ฅ๐ถ๐๐ฒ๐ฟ ๐ฏ: ๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ถ๐ป๐ด
This is the cash you earn (and spend) in the course of financing your company (loans, lines of credit, ownerโs equity).
All of these โriversโ help keep the lake full so you can do things like pay your payroll.
However, itโs REALLY important to know which river is contributing the most money to your business.
Hereโs why:
๐ตGoing through a slow season? A cash flow report can tell you if you need extra cash from the โFinancing Riverโ.
๐ตBefore giving you a loan, a bank wants proof that your โOperating Riverโ is the main source of your cash flow.
๐ตWant to make (profitable) long-term plans? This is the report you need for future cash flow projections.
Of course, a single social media post isnโt enough to cover everything, so I shared a helpful article below. ๐
And, of course, if you feel like you need more reports like this in your life โ but donโt know how to create one โ then just reach out. ๐ I create financial reports like these all. the. time. for my clients. And Iโd love to help you, too!
Email me at [email protected]
www.mcglncheybookkeeping.com
https://www.bench.co/blog/accounting/cash-flow-statements
