RSM Bird Cameron says balance sheets are key to business health but remain poorly understood by most business managers

October 6, 2011RSM Bird Cameron, one of the largest mid-tier accounting firms in Australia, says management of balance sheets is one of the keys to business health but remains poorly understood by many business managers.

Looking at the balance sheet as well as the profit and loss (P&L) statement is vital to understanding the complete financial state of the business.

While there is no doubt businesses need to be profitable, they also need to sustain growth and have available resources to be reactive to customers and the market. The first step to improving cash flow management is to understand the dynamics of the balance sheet back to front.

Andrew Graham, national head of business solutions, said, “While most businesses understand and actively manage their P&L statements, the same can’t be said for managing the balance sheet. The error many people make is to focus on the P&L to the exclusion of all else, which can be a potentially fatal mistake as healthy profits can mask a cash flow crisis. Read more ❯