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Updated: Feb 2, 2022

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The first thought of some entrepreneurs when they check their company's Financial Statement is: “I have profit but no money in the bank account!” Sometimes this happens because they don't know how to use the Financial Statements for the daily management of their business. Frequently, these Financial Statements are just used for Tax Compliance. However, this should not be the way to go. This financial information should be used to support your company and to plan cash flow. In this way, the management can evaluate the company’s ability to generate revenue and honor its commitments. 1. Financial Information The company must prepare a set of financial statements every year. - Income Statement - Balance sheet - Cash Flow Statement a) The Income Statement aims to assess the company's performance specifically to determine the net result for the period, for example, whether the company made a profit or a loss. This statement includes two categories of elements: Income and Expenses that allow us to determine the net result for the period. Net results for the period = Income - Expenses If the net result of the period is positive, it means that the company has PROFIT. From the economic point of view, this Profit/Loss can be interesting because it may mean that the company is financially viable. b) The Balance Sheet has the characteristic of representing the financial position of the resources used, how you finance the company and whether the company can honor its commitments. This statement includes three categories of elements: Assets (resources used), Liabilities, and equity (what are the sources of financing). Assets = Liabilities + Equity c) The purpose of the Cash Flow Statement is to assess the quality of the company's liquidity. To evaluate the company's ability to generate and use cash. It tells us the revenue generated by operating activity, the cash brought in by financing, and the cash that pays for investments. Therefore, the Cash Variation = Cash Flow from operating activities + Cash Flow from investing activities + Cash Flow from financing activities In this Statement, you can find the answer to your questions: "where did the money come from, and where did the money go to". So, if you are interested in improving your cash flow management, please contact us and we can schedule a meeting.

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