Is it carrying bags of cash, or debt collectors coming to take yours?

What we have found over our years in public practice is that many business owners have an amazing skill set in their area of specialty for providing a product or service they have developed but they admittedly state they have a lack of understanding of their own companies Income Statement and Balance Sheet.

Cash management is the main cause of business failure. This can be the result of many reasons such as a lack of sales, poor
pricing strategy, labour inefficiencies, capital purchases, rapid growth, sluggish receivables, far too many to be addressed in this article but definitely should be reviewed by you and your accountant for your own specific business.
We recommend that you review your financial statements every month. Play a game with yourself and write down the sales and the net profit for the month on a piece of paper. Now print off your Income Statement. How close were you? If the final results do not reflect what you have written down then you need to spend more time understanding why the financials don’t reflect the operations. If you need help with this then get your accountant involved. That is our job to make sure you know.

Will you have enough money to pay that HST at the end of next month? What is your WORKING CAPITAL? You know – Current Assets minus Current Liabilities. That may not be a good enough calculation for you thou. What is your LIQUID CAPITAL may be a better question. This is cash plus any easily converted items into cash such as marketable securities and accounts receivable minus your current liabilities. This will tell you if you have the cash available to meet your obligations.

Do you ever ask yourself – why am I working so hard but don’t have anything to show for it? Most entrepreneurs do – and often. Again, this is our job as your accountant to help answer those questions. Don’t be afraid of that billing clock ticking – ask us, it could save your business. It may be something as simple to identify as capital improvements to your company or changes in payment terms by your major customers. It may be a series of things such as labour costs greater than your competitors, purchase price increases or harder to identify problems such as time per customer/project/activity greater
than planned and ultimately invoiced. Always consider the 80/20 rule in your business. You will find that in many areas – you have this happening in your own business.
I am not a good mechanic or computer whiz or painter etc. Does that bother me? It did once but not anymore. I have come to terms with myself that I can’t know everything and I am willing to hire those professionals that do. The money I spend allows me to continue to drive my Jeep without worry, to use my computer without it crashing, to sit in my home on a Friday night and enjoy that martini in a beautifully decorated room. So if you are still having a difficult time understanding YOUR financial statements that will eventually result in cash management issues – why aren’t you asking your accounting
firm for help?

If you feel that you don’t have a clear view of the health of your business, we’d like to hear from you.k to you.


Thank you and I hope you enjoyed this article. Cheers!

Paul Drouillard, ACIS, P.Adm, CPA, CGA
Partner – Drouillard Sambrook Kingston (DSK)