Why is there no cash in your bank account when you're making a profit?
EPISODE 12
Notes
“Why is there no cash in my bank account when I know I’m making a profit?
This is a very common question amongst entrepreneurs. If you avoid learning your numbers and what they mean for your business, you’ll always be confused about where your money is going.
In this episode, I’m going to explore basic accounting and bookkeeping concepts that will allow you to understand your business financials and how they relate to your profit. I’ll go through 5 reasons why your cash doesn’t match your profit and loss report to build a thorough understanding of your business.
It can all come down to knowing the difference between a balance sheet and a profit and loss report (P&L). Through experience, I’ve found business owners have been disinterested in their balance sheet and don’t thoroughly understand it. But cash resides in your balance sheet and profit resides in your P&L so it’s very important to understand them both comprehensively.
You can’t compare profit and cash. I’ll explain how this works, the difference between a balance sheet and a P&L, where to find the numbers, and how to interpret cash, profit, assets, and liabilities.
Grab a pen and write down these 5 reasons so you have a concrete understanding of why your cash will not equal your profit and it’ll no longer scare you every time you open your bank account.
About the
Author
Bec is a chartered accountant who worked at Australia’s big firms and banks for 15-years. Faced at a crossroads in her career, she backed herself, left her corporate job and launched Straight Up Bookkeeping. 3 years and 5 staff later, Straight Up Bookkeeping is one of Australia’s leading virtual bookkeeping businesses for creatives, with a mission to free business owners from financial stress so they can grow their empires.
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