In the past, I have resorted to drawing on the financial statements, creating elaborate flow charts, building multi-tabbed excel spreadsheets, and one time I tried hand-puppets to make my point. But it’s just not a subject that makes sense to most people. The missing cash can usually be found hiding in the balance sheet as an  investment in customer receivables, increased inventory, or additions to fixed assets. The ins and outs of the missing cash can be tracked on the statement of cash flows, but no one ever reads it. (Except fellow accountants and sometimes bankers who are looking for evidence that their loans will be repaid.)

Part of the problem in explaining this concept and many others is the language barrier between us as accountants and the language of normal people like our clients. We tend to think and speak in a linear, numerical fashion while most business owners think visually and speak conceptually. After many years spent wrestling with this issue. we have found a tool that lets us bridge the communication gap. It’s called $COPE It!. It’s a new iteration of similar products we have been using for a couple of years. The beauty of this tool is that you can bring in financial statements, convert them into pictures, and then make changes to your results. So now, rather than telling you that selling more products and services at the same margin (with other factors unchanged) will generate NOT  more but LESS cash, I can change one number on the screen and show you the impact on your cash. I can also enter your targeted cash balance, and show you where to focus to achieve it.

After making one simple onscreen change to a set of numbers, I have had even marketing people proclaim that the blanket of confusion has been lifted from their eyes. Suddenly they understand why cash and profit are not the same thing.  It really changes the dialogue when you’re doing business planning, negotiating loans, or evaluating new sales strategies.

But you really have to see it to believe it – just ask a member of our team to show you how it works.

Now let’s talk about Debits versus Credits…