If you’ve been plugging away at making a business profit for a year or longer, you may be noticing that your Profit and Loss reports seem to be telling a very different story than your bank account.
Many new (and some old) small business owners review their profit and loss reports to find that their business has made a pretty hefty sum. But there’s a problem!
There’s no evidence of that money anywhere. Bank accounts don’t always reflect the profit section of the profit and loss. Why?
Let’s dive into the different reasons!
Loans and Liabilities
Unfortunately, your Profit and Loss statement (otherwise known as a P&L) doesn’t tell the whole story of your business’s financial position. There are actually two other financial reports that your accountant should give to you besides your P&L: the balance sheet and the cash-flow statement.
Along with your P&L, be sure to check these other two reports – they will provide you with a more complete picture of where exactly that profit has gone. If you’ve taken out a business loan or used your credit card to make company purchases, much of that profit may never have reached your bank account.
If the disparity between your business revenue and your bank account still doesn’t make sense, the next thing you should do is a little reconciliation.
Your Accounts receivables is where all the income you earn from customers promising to pay you for your products or services on credit goes. If you see a large disparity between your P&L and the bank account, chances are that money is owed to you by your customers and there is always a risk that some of your customers will simply not pay you back.
How to Reduce Accounts Receivables Risks
While there are risks in every business venture, here at ABJ Business Solutions, our financial professionals can help you review your accounts receivables frequently so you can catch issues before they become bigger problems! We have also had much success in properly managing the collection of outstanding invoices and reducing the time taken between issuing an invoice and collecting the cash.
Get in touch with us today to find out how we can help you with the reconciliation of accounts receivables amongst other financial services!