Pre-pandemic, I would sit at the chef’s counter of my favorite restaurant in Portland, the Hairy Lobster, watching the chef, and his sous chef work their magic to produce what I considered the best food in Portland, I was thinking about their mastery of cooking and what was required to achieve it. These chefs had learned the language of cooking—teaspoons, tablespoons, cups, pinches, temperature, seasoning, and much more—allowing them to produce amazing results. The language is such a part of them, it’s as if they’ve become native speakers.
It is the same with musicians. The ones that move us with their songs have learned the language of music—flats, sharps, chords, and keys. Their investment in learning the language produces the compositions we spend our time listening to.
As a business owner, you are responsible for learning the language of business which is accounting. Understanding the P&L and balance sheet and how they are interconnected is critical to the success of your business. But these two tools both look backwards. Their information is already dated by the time you get your reports. What has happened has already happened, and you can’t do much to change it.
Business owners need one more tool to produce great results—the cash flow projection. The cash flow projection is the only tool you have that looks ahead at what is coming in your business so you can forecast your cash needs.
Business owners often think that net income on the bottom line of their P&L is cash, but it is only the theory of cash since the P&L does not account for debt payments or owner draws on the business. This highlights the need for a cash flow projection, which takes your debt payments into account (which is a use of cash).
If you would like to learn the language of business and master the finances of your business as well as the business metrics that will create amazing results, give us a call. We can help. 503-312-3145.
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