To understand where your money has gone, request a cash flow statement


IIf you were on top of your finances for 2019, you may have already received a nice bundle of heavyweight papers from your CPA detailing your financial performance for the past year. Documents will include an income statement and balance sheet along with details of your tax returns and what you might owe the IRS (or what they might owe you).

Chances are, like most people, you’ll have a quick glance and then put them aside for later reading. If you start looking at them again (and many of you might not look at them at all), you might be asking yourself the # 1 question most people ask when looking at their bottom line: “If i supposedly made some money, how come i don’t have money to show for it? “

You’re not alone. Most businesses notice a discrepancy between their profit and the amount of cash that appears on their bank statement. A profit of $ 100,000 rarely translates into an additional bank balance of $ 100,000. In fact, not all expenses and products are recorded as such in the year in which they are incurred.

Inventory is a good example. The cost of a piece of jewelry is not recognized as an expense until it is sold (when it can be reconciled with the income it generates at the time of sale). This means that a diamond bracelet that costs $ 5,000 to purchase will reduce the bank balance by $ 5,000, but will not be recorded as an expense against profit until it is sold – that is. which may take a year or two after its introduction if the article is not quick. seller.

The easiest way to see what’s coming in and going out is by looking at a cash flow statement. This is a report your CPA can prepare for you that shows all of the money that went in for the year and all of the money that went out, including personal expenses and assets that could be purchased. This gives you a better way to see where your money is coming from and how you have handled it once it has arrived.

For most jewelers, cash is closely related to sales – after all, we are fortunate to be in a business that relies heavily on cash. The real benefit of this report is in the visualization of expenses. A report like this will show more clearly how the money is handled.


A statement of cash flows (your CPA may use a different name for this, such as a statement of cash flows or a statement of changes in financial position) is not something you might need in part of your finances each year, but getting one every now and then can help explain how your cash flow works and what changes you may need to make to keep more of it in your business.

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