Cash

Preparing Cash Flow Statements – the 2 Different Approaches

Preparing Cash Flow Statements – the 2 Different Approaches

I’m often asked about the two different ways of preparing cash flow statements.  They are methods. Just methods. We all have our favorite way of doing things and they work for our purposes.  Sometimes we can’t even explain why we use one technique over another.  The best answer we can muster is, “that’s the way I was trained”.  In accounting, as long as we adhere to the guiding principles, most every method has a reasonable explanation. Preparing a statement of cash flow for a company is no different. 

 

But there has to be a reason why nearly all companies use the indirect method versus the direct method.

There is – and the answer isn’t that interesting.  It’s just easier.  So let’s discuss what the primary differences are so you can come to your own conclusion about which method you prefer...

Expense Control – One Rule to Rule them all

Expense Control – One Rule to Rule them all

There is simply one rule to live by in small business if you want to stay in business.  The rule is the change in your operating expenses should mirror the change in your gross profit.  This is typically called expense control.  However, it should be called the essential function of a business.  It’s essential because without it your company will die.