Subtitles of the Movie

We've just finished talking about the significance of our cash flow. Let's now talk about the actual statements within QuickBooks. First, let's go to a Balance Sheet. On this Balance Sheet, I have taken the prior year and the current year so that we can see the change. When we're working with Cash Flow Statements, we always look at the change in accounts. So cash flow wise, we would look at our savings accounts and our checking accounts and we would predict that we are going to see an increase of approximately 60,000 dollars. In Accounts Receivable, we're predicting that we're going to see an increase of 8,000 dollars. If we move down you'll notice that the other accounts we do not anticipate any changes. Cash flow assumes that you always have a baseline in your business. There is always going to be an average Accounts Receivable, an average Accounts Payable. As a result, what we're interested in actually checking is the change to those accounts. Let's open up a Statement of Cash Flow and see how this works. When I go into this Cash Flow Statement, you'll notice that at first it starts with our Net Income. This is our anticipated cash balance. Now I want to do adjustments to that balance to account for monies coming in and monies going out. You'll notice that Accounts Receivable is actually a negative number. Keep in mind that if I loan my customer money through Accounts Receivable, I've depleted the cash available to spend on an item. The opposite is true of Accounts Payable. If I have taken an IOU and did not give you cash, I am in essence taking a loan from your. By deferring your bill, I have increased my Cash Flow. This is a very important concept of tracking cash. Accounts Payable, when it is actually higher, has a positive impact on my cash flow because I'm not spending the cash. Keep in mind that all we're interested in here is the inflow and outflow of cash. You will notice that anything that is a payable is going to actually have a positive impact. So in this particular case, you will note that my Accounts Receivable has decreased my cash. If we go back to the Balance Sheet, what you'll notice is that my Accounts Payable actually went up. That means I'm tying up more funds by giving my clients IOUs. You'll also notice that if I look at my Accounts Payable, it's gone down. I've used more cash to pay those bills, therefore once again, it has a negative impact on my cash flow. Understanding the Cash Flow Statement is a bit difficult at first. Take some time, read through it and you'll get some good understandings. The key though is to remember that I'm actually looking at the change between one period to the next. Now, after I go through all of the accounts that are going to affect my cash flow, I can then predict exactly how much money I intend to have at the end of the period. If, for instance, I'm a contractor and I'm anticipating a large project coming up, I may need every penny that is here just to be able to buy the goods that I need to finish the project. That's where cash flow becomes so important. Take some time to understand the statement. You'll also notice that QuickBooks will have two different versions of it. I'm looking at the Statement of Cash Flow. Now I'm going to go into the Cash Flow Forecast. In the Cash Flow Forecast, it anticipates for me the changes in Accounts Receivable, the changes in Accounts Payable and the changes in my bank account. You'll notice that there's a slightly different end result. This is because it's not tracking every individual account, only your majors. The traditional Statement of Cash Flow is what most businesses use.