This is a very common question from business owners who feel like they are making a profit in business but have no money to show for it.
The balance sheet is one of the statements that we prepare and review which shows the movements in cash throughout the year.
You can usually get a clear indication looking at the balance sheet for a business and see where the money has gone. Often it is sitting in a mysterious account called drawings where all transactions with the business owners are recorded – when they are taking money out of the business or introducing funds.
Other reasons why the business may have no money, could be that the money is tied up in debtors, your customers that owe you money. Not managing your debtors can lead to struggles with cash.
Of course, cash could be tied up in the likes of stock and fixed assets purchase like cars.
Business owners need to get familiar with their balance sheets and cash positions to ensure they can navigate the ups and downs of business.