Profit & Loss: In simple terms, P&L shows how much income your business generates and how much in resources your business spent to generate that income. Notice that we are saying “generate,” not “received” or “paid,” because a P&L report does not consider whether you received your invoices or paid your bills. The goal here is to find out how much value your business is generating.
Cash Flow: As the opposite of accrual basis, cash flow shows how much actual money you received and spent. Cash flow helps us understand cash gaps like the impact of a client paying you late or your own delayed payments. In a cash flow report, you also can see the capitalization and investment transactions that are not available on the Profit & Loss.
Both reports are helpful, and they tell the same history in two different ways to give us a complete picture of your business. While the P&L shows how much income you earned and how much you incurred in expenses, it does not tell you how much money your business has, which is crucial to keep your business running.
777Eccounting has partnered with FloatApp, an online cash flow system that gets data from your Xero app in real time, and generates forecasts for your business. If you want to know more about this system, contact us at firstname.lastname@example.org.
Float App: https://www.youtube.com/channel/UC2rXKKGO6kslITkMsSL_muw
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