Cash Management

Some of you have probably heard of a Statement of Cash Flows. Your accounting software will run this report for you based on all the information you have already input. It is a financial statement that shows how changes in your balance sheet accounts and income affect your operating cash. To put it simply, how much cash do you have to work with?

I was teaching an accounting class one time and one owner in particular could not understand why his truck payments were not on his P&L. I had to explain that the P&L is the day-to-day operation of the business and whether the business was making money or not. Truck payments only affected his cash on the Balance Sheet and have nothing to do with day-to-day operations. The P&L does not reflect the money in the bank. Then, the light bulb when off, and he said, “Now I understand how I can make money, but never have any in the bank!”

If you look at my management tools, they are the DailyTrac© System, the Profit & Loss Statement, and a simple Cash Report. A true statement of cash flows takes your P&L and adds back depreciation, changes in your accounts receivable, changes in inventory, etc. My cash report is much easier. We start off with the amount of cash in the bank, add deposits, subtract expenses paid, then subtract current bills due and what is left is your money. Hopefully it is a positive amount.

Those that pay their bills the minute they hit the door find it even easier. How much did you deposit in the bank and how much did you take out? As long as the running number is positive, all is good. When it becomes negative, I hope you have some funds in the bank to operate on, but unless you are looking at the ins and outs, how will you know?

I find plumbers in particular don’t want to get involved too heavily in the financial side of the business. They think it is too complicated, so I attempt to keep it simple. What are the numbers for the week? What does the P&L show for the month? And, a simple cash statement. Honestly, if you have this information, you can run a business.

I actually know of one company where the bookkeeper was taking some cash for herself. The owner was not paying much attention but noticed his cash statement for the month started changing and he did not know why. He wasn’t making any large purchases, but his cash was getting smaller. He did notice that his material usage was rising slightly on his P&L and between the two, he traced his loss to a fictitious supply house. Yes, you guessed. You don’t need to be an accountant, but if you have the tools, you can certainly manage your business properly.

If you need some support from someone who has been in the plumbing industry, please let me know. I am ready to help you take your business to the next level. Also participate in our new training programs. Training your employees is sowing seeds for your business future. Get more information at

The Plumbers Coach™ Detailed personalized business coaching and training for plumbing contractors. Like us on Facebook @ThePlumbersCoach, follow us on Twitter @T_PlumbersCoach and LinkedIn at KeithGlass15.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top