Since we’ve opened the toolbox to see what a Cash Flow Report looks like, let’s look around at some of the other tools in the bag. There’s one called an Income Report, and it has the word “Profit” on it!
Will our vCFO be using this tool at all? Of course!
What Is an Income Report?
This report is the standard work of an accountant and is another one of the business performance details your McAllen vCFO can provide you. It is also known as a Profit and Loss Report since it calculates what has been gained or lost over the entire year.
If your business gained more revenue from sales of products and services than it lost in expenses for manufacturing, employee salaries and overhead, purchasing, etc., then you’ve had a profitable year.
The Income Report is where you’ll see these year-end, bottom-line details.
How Is Profit Different From Cash Flow?
Cash flow is only concerned with actual transfers of money into and out of your account and is usually reported on a monthly basis to show in more detail how your company’s account was affected by various events throughout the year.
Profit is typically recorded as a year-end result and is the ultimate judge of what your company may owe the government in taxes.
While the two are usually related, it is possible to have contradicting results; one single quarter of bad cash flow may wipe out all of the gains from the rest of the year, resulting not in profit but in loss, even though cash flow was mostly positive throughout the year.
Which Is a Better Measure of Your Business Success?
For a full view of your business operations, both profits and cash flow must be analyzed.
Simply focusing on bottom-line profits may blind you to business operations that are putting your chances at making future profits in jeopardy. This would be like driving your car without ever checking to see how much gas remains in the tank.
Setting a big goal will require a lot of energy to complete and hoping for big profits will require a strong cash flow. Only with an accurate cash flow report can you know when to take advantage of new opportunities that may appear or know if you can withstand unexpected headwinds that threaten to slow your business down.
The Best of Both Worlds
Your McAllen virtual Chief Financial Officer is ready to use both of these tools to align your business operations towards the strategic goals that you set. Income Reports, Cash Flow Reports, Performance Reports; all of the financial tools you’ll need are in your partner’s toolbox.
Meet with your vCFO today to gain a better view of all of your business operations.