Management Tips

Cash Flow – the Bigger Picture

If you have cash left after all the bills are paid at the end of the month, everything is fine – right? Not really. There could be a tsunami brewing that could wipe out your cash and you might not seeing it coming if you are only looking at the cash register.

Cash flow analysis looks at cash that is generated and used in the P&L and in the Balance Sheet. Many small businesses think the P&L really tells the whole story, but without the Balance Sheet you are only seeing part of the story.

Here I would like to pause to say a special thanks to Ed Patton, a cash flow expert and a special member of the Corelytics advisors network. We have collaborated with Ed over the past couple of years to develop a very easy to understand cash flow review report. This report is still in beta while we work with selected advisors and their clients to verify that we are presenting data in the most easily understood form. Most business owners have told us that traditional cash flow reports produced by most accounting systems and by most accounting firms are confusing and not helpful. Our goal is to deliver a report that is easy to understand and easy to use in business decision making.

As Ed would say, “A cash flow report should answer the basic questions such as ‘why is my cash balance going down as my revenue is going up?’ and other key questions about the life-blood of the company.” Am I tying up cash in new investments faster than it can be replenished? Am I paying down debt too fast or too slow? Many of these questions can be answered by cash flow analysis.

Cash flow is the primary driver of financial performance in any business. It can be driven with precision or with ball-park estimates and gut feel. Precision steering has a much greater probability of success.

If you have an interest in participating in our beta evaluation of the Ed Patton Cash Flow System, EPS for short, just contact us at This report will be available to Corelytics users as an add-on and can be generated anytime, on demand. It makes sense out of cash flow that is not available anywhere else.