Your Balance Sheet & P&L: Like Peanut Butter & Jelly
Peanut butter and Jelly. It’s a classic combination that you don’t realize is missing anything until one day you try it with something new, like Potato chips, bacon, or a few other ideas listed here at spoon university.
Our favorite addition to this beloved pairing?
A baseball bat, classically added in the Peanut Butter Jelly Time song by the Buckwheat Boyz, and viralized by YouTube.
Balance Sheet & P&L: What’s Missing?
So, how does Peanut Butter Jelly Time relate to business?
Well, the perfect combination for your business is your P&L and Balance Sheet.
These two key financial statements combine perfectly together, just like peanut butter and jelly.
But, as a business owner, you constantly struggle to relate the two statements and you always feel like something is missing, like that extra crunch of a potato chip or a dancing banana meme and a baseball bat.
So what is the missing ingredient?
What is missing in your business review and analysis?
The missing ingredient – that magical element that makes it better – is your Statement of Cash Flows.
Do you need it to run your business? No, but it makes everything better.
How The Statement of Cash Flow Fits In
If your P&L is your revenue over a period of time, and your Balance Sheet is a snapshot of your business as of a specific point in time, then your Statement of Cash Flows is the bridge between the two.
The Statement of Cash Flows helps answer the question:
“If my P&L looks like this, then why is my cash balance so blah?”
As a business owner, do you often feel like your cash flow balance is not representative of your profitability?
The Statement of Cash Flows helps explain the story of how your profit level translated to an increase or decrease in your cash flow balance.
Fathom (our preferred reporting dashboard) does a fantastic job of relaying this information to business owners with their cash flows report. It turns a complicated report into an easy-to-understand picture of what has happened to your business’s cash flow.
While there are many different causes as to why your cash flow doesn’t align with your P&L, there are some usual suspects.
For that, you will have to stay tuned for out next article.
Contact U-nique Accounting for Assistance
Are you struggling to figure out why your cash flow is so low?
We are well-versed in helping small business owners fix cash flow problems and ensure a continuity of business.
If you have a question I’ve haven’t answered, you can book a complimentary first call here.
Until next time.