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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...

Darwin Would Love Today’s Mom and Pop Stores – In Celebration of National Mom and Pop Business Owners Day

Darwin Would Love Today’s Mom and Pop Stores – In Celebration of National Mom and Pop Business Owners Day

Survival of the fittest. That’s exactly how I would describe the conditions created in recent history within many American communities. The rise of the mega stores, or shopping clubs, create an intense amount of pressure for the traditional Mom and Pop stores. Lower prices and a seemingly unending amount of choices, combined with overwhelming advertising, make it virtually impossible for a small store to compete. 

Like Charles Darwin’s theory of evolution by natural selection, many of today’s mega corporations evolved from smaller business entities. Through a series of generations, the corporations took on different attributes and naturally evolved to meet the conditions that surrounded it. There can be microevolution where the original organism changes shape or color. Or macroevolution where the old version no longer exists.

Why Giving Away Your Product for FREE is Great!

Why Giving Away Your Product for FREE is Great!

Don’t do it they said. You’ll damage the brand and reduce its value. People don’t trust free products. The list of reasons why you shouldn’t launch a free product is long. The scariest of course is “how will your company survive?”

But let’s image you answered the survival question and genuinely felt that your product could positively impact the world. The only thing between a noticeable change in the lives of small business owners and your product was letting them know you existed. It’s no small task, but it’s the biggest question in many entrepreneurs’ minds. How do I get my product in more hands? In many cases similar to ours, the answer is to give it to the people who can benefit the most.