Where Did All My Money Go?
Today I have Jill from Jill Jacobs Bookkeeping talking about all the things. Jill has a way of making bookkeeping actually fun and interesting, and she really does know it ALL! Her phone is constantly blowing up with my questions and problems. I don’t even want to know how many times I text her with, “Something is wrong with my Quickbooks! Can you look at it?!” with a million crying face emojis. Jill is THE BEST and pretty much every single business in the Lincoln Nebraska area will agree.
So let’s break down a common question - your Profit & Loss Statement.
Have you ever looked at your Profit & Loss Statement (your P&L) and it says that your net income is, let’s say $10,000? Then, you look at your bank account and you definitely do NOT have $10,000! (don’t feel silly, it happens to everyone)
Well, that's because net income and cash flow mean different things and should NOT be used interchangeably.
Net Income is the profit that your small business earned over a period of time. Whereas cash flow is the money you actually have on hand.
It’s important to remember that several different things can cause this difference in your Profit & Loss Statement.
If you are running accrual basis accounting, your Profit & Loss Statement is actually showing revenue when it was invoiced vs. when it was actually received. So odds are, you are showing income that hasn’t been deposited into the bank yet - in turn affecting your cash amount.
Also, if you are paying back loans or taking owners draw, this will affect your cash flow and not your Profit & Loss Statement. Loans and owner’s draws are reported on the balance sheet.
Not confusing at all, right? Wrong. It IS confusing. Don’t be afraid to ask your CPA or bookkeeper all the questions! No question is dumb, I promise.
If you are in need of bookkeeping services, Jill Jacobs Bookkeeping is a great resource to check out!
