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CHAPTER 8 MASTERING YOUR MONEY

expense on the Profit & Loss statement. However, you still have
to pay the cash for these items that you have purchased.

So, as you can see, just looking at the Profit & Loss Statement
alone can be very misleading! It may seem as if you have
made $300,00 in Sales in January, but the cash may only
be received in March. If you bought $20,000 worth of
computers in January, it will not be shown as an expense in
your Profit & Loss. However, you will find yourself having to
make payment for the goods.

So, you need the Statement of Cash Flows to tell you exactly
how much cash is coming in on a particular month (inflow)
and how much cash is being paid out (outflow). This will help
you to manage your cash to ensure that you have enough in
your bank account (cash balance) at any time to keep your
business running. Here are just some examples of a company’s
monthly Cash Inflows & Outflows:

Cash Inflows:
• Cash Revenues received
• Bank Loan Received

Cash Outflows:
• Cash Payments to Trade Suppliers
• Salaries paid
• Rental paid
• Telecommunications
• Transport allowance paid
• Staff claims paid
• Bank loan installment paid
• Cash payment for Purchase of office equipment/

supplies
• Taxes Paid

Net Cash Inflow = Cash Inflow – Cash Outflow

256 SECRETS OF BUILDING MULTI-MILLION DOLLAR BUSINESSES