Balance Sheet Components

Most CEOs focus on the P&L. That's a big mistake. A company can be profitable today and still fail to: Scale Attract investors Create long-term shareholder value. Why? Because CEOs focus on earnings instead of cash flow strategy. ➡️ Learn to understand a cash flow statement in 10 steps and never miss another red flag again: https://lnkd.in/e2JXiUK6 Without a plan to generate, allocate, and invest cash, you risk: ↳ Chasing revenue instead of high-ROIC investments ↳ Wasting capital on low-impact initiatives ↳ Carrying debt that weakens financial flexibility ↳ Failing to attract the right capital at the right time ↳ Missing opportunities to scale sustainably That’s why the Cash Flow Statement is the most important financial report in your business. Here’s how it actually works (and how to master it). 1. Operating Activities = The Cash Engine This is the heartbeat of your business, where cash is created or destroyed in daily operations. Where cash comes from: ↳ Sales collected in cash ↳ Payments received on past receivables ↳ Interest and dividends received Where cash goes: ↳ Payments to suppliers and employees ↳ Interest on debt ↳ Taxes How to master it: ↳ Optimize your cash conversion cycle. ↳ Use sensitivity analysis to stress-test your plans. 2. Investing Activities = The Growth Playbook This is where strategy meets execution. How you deploy cash to drive enterprise value. Where cash comes from: ↳ Selling equipment or investments ↳ Loan repayments from others Where cash goes: ↳ Buying property, equipment, or investments ↳ Lending cash to others How to master it: ↳ Prioritize investments using NPV and IRR. ↳ Align investments with sustainable operating cash flow growth 3. Financing Activities = The Capital Structure This determines how you fund your expansion — through debt or equity. Where cash comes from: ↳ Issuing stock ↳ Taking on new debt Where cash goes: ↳ Paying dividends ↳ Buying back stock ↳ Paying off debt How to master it: ↳ Optimize your capital structure. ↳ Align dividend and stock repurchase policies. The Takeaway: Most CEOs focus on profit first. But real financial intelligence starts with cash flow strategy. Because the businesses that win aren’t just profitable. They leverage their cash to maximize enterprise value. Want more? Join my free Cash Flow Masterclass: https://bit.ly/49n7Lqh ♻️ Like, Comment and Repost to help your network.  Follow Oana Labes, MBA, CPA for strategic financial leadership.

Your guide to Accounts Receivable 👇 Ever wondered what REALLY happens when a customer owes you money? Let's dive deep into Accounts Receivable (AR) - the lifeline of your business's cash flow. ➡️ WHAT IS ACCOUNTS RECEIVABLE? Simply put, it's money customers owe you for goods or services they purchased on credit. But here's what most people don't realize... While you might have amounts owed by banks or owners (those go into different accounts like notes receivable), AR is specifically for customer balances. Don't confuse this with Accounts Payable - that's when YOU owe money to others. Remember: - You send INVOICES to customers - You receive BILLS from vendors ➡️ WHY AR MATTERS? 💸 Direct Cash Flow → Your receivables convert straight to cash, unlike inventory that just sits there 💰 Cash Flow Impact → Long collection cycles can absolutely destroy your working capital ⚠️ Risk Management → Large AR balances mean increased bad debt risk (I've seen this sink businesses!) 📝 Customer Terms → While customers need flexible terms, you need a robust system to manage them 📈 Growth & Stability → Efficient AR management is what fuels your business expansion ➡️ THE ACCOUNTING BEHIND AR Here's where the magic happens (and yes, accounting can be magical! 😉) When you issue an invoice: - Debit Accounts Receivable - Credit Revenue When you finally get paid: - Debit Cash - Credit Accounts Receivable ➡️ TECHNOLOGY IS YOUR FRIEND Stop doing this manually! Here's what modern AR software can do for you: - Automated invoicing - Real-time payment tracking - Built-in reminders - Integration with your accounting system ➡️ PROVEN STRATEGIES THAT WORK 🤝 Friendly Approaches (Try These First!): - Request payment upfront whenever possible - Collect credit card/banking details for autodebit - Follow up consistently (trust me, the squeaky wheel gets paid!) - Request credit references before extending terms - Offer early payment discounts (like 3/7 net 30) ❌ When Friendly Doesn't Work: - Stop service if payment isn't collected (just like your electric company!) - Send the account to collections (yes, you'll get less, but something is better than nothing) - Take legal action (last resort, but sometimes necessary) ➡️ CRUCIAL METRICS TO TRACK These are the numbers you NEED to watch: 📊 Days Sales Outstanding (DSO) Formula: (AR / Net Credit Sales) * Number of days Lower is better - it shows how quickly you're collecting! 📈 AR Turnover Ratio Formula: Net Credit Sales / Average AR Higher is better - shows how many times you convert AR to cash 📉 Bad Debt Expense Ratio Formula: Bad Debt Expense / Total Credit Sales Lower is better - shows how much you're losing to bad debt === The way you handle AR can literally make or break your cash flow. I've seen businesses transform their entire financial position just by getting better at managing their receivables. What's your biggest AR challenge? Let me know in the comments below 👇

It’s an oxymoron. While everyone is focused on agentic commerce, payments have a (much simpler) $3 trillion problem waiting to be solved. Now, there’s a contender. On any given day $𝟯 𝘁𝗿𝗶𝗹𝗹𝗶𝗼𝗻 sits in accounts receivable - unpaid invoices companies are owed after delivering goods or services. • Money earned but not yet collected • Often tied up for weeks or months • Requiring ongoing follow-ups, tracking, and reconciliation to convert into cash That amount alone exceeds the size of the entire UK economy - locked in unpaid invoices. And this is just the US. It is remarkable how, in the age of AI, a typical accounts receivable process is stuck in the past: • Invoices, payments, and reconciliation sit in separate systems that don’t connect • Payments arrive without context, requiring manual matching to invoices • Finance teams spend time chasing updates instead of managing cash • No real-time view of what’s been paid, pending, or overdue • The process still relies on emails, spreadsheets, and human coordination 𝗔𝗻𝗱 𝗵𝗲𝗿𝗲 𝗰𝗼𝗺𝗲𝘀 𝘁𝗵𝗲 𝗱𝗶𝘀𝗿𝘂𝗽𝘁𝗶𝗼𝗻 𝗽𝗼𝗶𝗻𝘁. A team of just 10 people – a New York–based fintech called Monk - has rebuilt this flow from contract to cash: • Starts from the contract, structuring billing terms upfront instead of relying on manual invoice setup • Matches payments to invoices automatically, even when data is incomplete or inconsistent • Adapts follow-ups and actions based on actual payment behavior, not fixed reminder schedules • Keeps invoicing, collections, and reconciliation in a single continuous flow instead of separate systems • Handles exceptions within the system, reducing reliance on emails, spreadsheets, and manual work 𝗧𝗵𝗲 𝗿𝗲𝘀𝘂𝗹𝘁𝘀 𝗮𝗿𝗲 𝗶𝗺𝗽𝗿𝗲𝘀𝘀𝗶𝘃𝗲: • 90%+ accuracy in turning contracts into invoices. Automatically • 18 hours reported time savings per week. Time earned back to focus on growing the business • 24% higher collection response rates • +37% average increase in cash on hand • 60% decrease in unpaid invoices • 40%+ reduction in time to get paid    𝗧𝗵𝗶𝘀 𝗶𝘀 𝗮 𝗯𝗿𝗼𝗮𝗱𝗲𝗿 𝘀𝗵𝗶𝗳𝘁. Because the problem is not unique to accounts receivable - it’s a pattern across financial workflows. We have built systems around transactions, but have left the underlying logic - contracts, terms, context - outside, to be handled manually. Now AI is bringing that logic into the flow, connecting it directly to action points and releasing huge amounts of time, cash, and operational capacity. Monk has announced today their series A. Watch out for companies solving large, existing problems while everyone else is focused on what might come next. Opinions: my own, Graphic source: Monk 𝐒𝐮𝐛𝐬𝐜𝐫𝐢𝐛𝐞 𝐭𝐨 𝐦𝐲 𝐧𝐞𝐰𝐬𝐥𝐞𝐭𝐭𝐞𝐫: https://lnkd.in/dkqhnxdg 

💸 How I’d Manage a $3M Seed Round I’ve raised over $50M+ in seed capital as a founder across my companies, but I’ll be honest, I didn’t really learn cash management until SVB crashed in 2023. That Friday, I was panicking. I had payroll due in days and was on the phone with every banker I knew trying to move funds out before things froze. That moment burned one lesson into me: as a founder, your cash strategy is your survival strategy. When you raise your first real round, it’s easy to focus on hiring, shipping, and runway math and forget that managing your cash is now a full-time job. Here’s how I think about startup treasury setup once that wire hits your account with four buckets: Operating, Reserve, Yield, and Contingency. 1️⃣ Operating: Keep 6–9 months of burn liquid. Use a modern bank like Mercury or Rho with sub-accounts for payroll, taxes, and payables. Automate categorization and approvals. 2️⃣ Reserve & Yield: Move the rest into yield-generating, safe instruments: FDIC-insured sweep accounts, short-term T-bills via Meow/Vesto/Arc, or government-only money-market funds. You can earn 4–5 % while staying fully insured or backed by Treasuries. 3️⃣ Credit & Liquidity: Even if you don’t need it, set up lines early. Ramp, Brex, or Mercury IO for corporate cards, and a small LOC with your bank after 6 months of deposits. 4️⃣ Contingency: Always have a backup bank. If your primary is digital, your secondary should be a traditional one (think Chase or BofA). Keep at least one month of burn there in case wires freeze or systems glitch. A solid setup like this can extend your runway by months and keep 100 % of your deposits insured. I broke this down (with a model and a 1-page cash management policy template) in a doc you can use with your board or CFO. 👉 Comment “CASH” below and follow me so I can send you the link.

E2E Accounts Payable steps :- Processing an Accounts Payable (AP) invoice involves several key steps to ensure accuracy, compliance, quality and timely payments. Here’s a standard workflow we can follow: 1. Invoice Receipt: • Receive the invoice via email, mail, EDI, or supplier portal. • Stamp the invoice with the receipt date (if manual). 2. Invoice Verification - Check the following: • Vendor name and address • Invoice number (unique) • Date of invoice • Purchase Order (PO) number (if applicable) • Description, quantity, and price of goods/services • Payment terms • Tax details (GST, VAT, etc.) • Ensure the invoice is not duplicated. 3. Match the Invoice: • 2-way match: (Service-based PO invoices, recurring purchases & subscriptions etc) Invoice vs. Purchase Order • 3-way match: (Material PO Invoice) Invoice vs. Purchase Order vs. Goods Receipt Note (GRN) Confirm:Quantity received = Quantity billed & Price as per PO= Price on invoice 4. Code the Invoice: • Assign appropriate GL (General Ledger) codes, cost centers, and project codes. • Ensure correct accounting treatment (capital vs. expense). 5. Approval Workflow: Route the invoice for internal approval if required (non-PO or exceptions). • Approval levels may depend on the invoice amount or department policy. 6. Enter into Accounting System: • Record the invoice in the AP module of ERP/accounting software. • Capture: • Vendor details • Invoice details • Due date (based on payment terms) 7. Schedule for Payment: • Review payment terms to determine due date. • Set for payment in the payment run. • Verify discounts for early payment, if any. 8. Make Payment: • Pay via approved mode: bank transfer, cheque, ACH, etc. • Record payment in the system. • Send remittance advice to the vendor. 9. Record & update: Record the payment in the accounting system to reflect the transaction and update the accounts payable ledger. 10. Reconcile and Archive: • Reconcile vendor statements with AP ledger. • Resolve discrepancies. • Archive invoice documents as per compliance requirements. #accountspayable #AP #APprocess #E2EAPworkflow #bestpractice #P2P #procuretopay #apsteps #workflow

Financial models should work harder for you than you do on them. Here's how to set up a model that updates itself using dynamic sum arrays. This accounts receivable aging schedule is driven by dates and amounts in a dynamic table. The table can connect to an AR aging file from Quickbooks, Xero, NetSuite or other accounting software. A BYCOL function dynamically sums the correct range, no matter how the data shifts. If invoices are paid partially, and amounts change, no manual update is needed. Power Query can bring in the new values and the dynamic array captures it perfectly. If collection dates shifts from 8/18 to 9/18, the Treasurer or AR clerk can make the change in the system, the data updates and is captured automatically in the collections forecast. Did you notice that 10/7 and 10/14 automatically appeared when the invoice dates changed? That's how you get financial models to do the not-so-exciting, yet extremely important, work on your behalf.

In investing, I've found, we often talk most about investing for the "long-term." That's important, clearly. But in wealth management, perhaps not every goal is long-term. In a new article, I write about three strategies to manage short-term goals and time cash flows, strategically using bonds, bond funds, and cash and other short-term investments for money needed soon. How soon? We suggest, ask yourself, or work with planner to determine, "how much money might I need for any goal, within the next 2-4 years," beyond a paycheck, Social Security, investment income, or other sources. Then, consider these strategies: #1 - Asset/liability matching. CD and bond ladders are not just ways to help manage the risk of changing interest rates; they can also be a useful short-term, cash-flow management strategy. Match the amount needed (the “liability”) with an “asset” that has a matching investment time horizon to generate the cash you need, when you need it. #2 - Duration targeting. This strategy involves laddering by time horizon using bond funds. Not every bond fund is the same, so choosing wisely by you particular need, goal, time horizon, and risk is important. #3 – Cash management. Think about managing cash for two purposes: (1) everyday cash in your checking account or brokerage account - what you need today to pay bills and expenses or purchase investments, if you choose; and (2) savings and investment cash - cash “products” like money market funds and bank CDs that may offer a higher yield and help you preserve your principal, while still providing easy access to your money. https://lnkd.in/gfyWUGk9 #investing #wealthmanagement

What's your plan if sales drop tomorrow—but expenses don't? In today's volatile market, having strong cash reserves isn't just good business practice—it's survival insurance. I've witnessed countless businesses crumble during downturns, not because their business model was flawed, but because they lacked the cash buffer to weather the storm. Here's what smart companies do differently: • Keep 6-12 months of operating expenses in liquid assets • Maintain separate accounts for growth opportunities • Review cash positions weekly, not monthly • Create clear triggers for when to tap into reserves The most successful companies I advise don't see cash as stagnant capital. They view it as strategic ammunition, ready to deploy when others are forced to retreat. During the 2008 crash, businesses with strong cash positions didn't just survive—they thrived. While competitors sold assets at discount prices, cash-rich companies expanded their market share at bargain rates. Think of cash reserves as your business's oxygen mask. When turbulence hits, you need to secure yours first before you can help others. Take a hard look at your current cash position. Are you truly prepared for unexpected turbulence? What steps could you take this quarter to strengthen your cash buffer? Let me know your thoughts on building strategic cash reserves. What's working for your business? An Indian Army veteran, have been helping entrepreneurs with a ‘Debt-Strategist’ for the last 30+ years. if you are not happy with your bank → Book a no obligation call today.

Let’s say you write a $12,000 check in January for a full year of business insurance. Should you record a $12,000 expense in January? Not under accrual accounting. Here’s why: Even though you paid in January, the service, insurance coverage, is delivered over time. That means in January, you’ve prepaid for a future benefit. Every month you can rest easy that you have insurance coverage. So what happens? In January, you don’t record an expense when you pay for the insurance coverage. You record an asset called Prepaid Insurance for $12,000. Then, at the end of each month, you expense $1,000 as the benefit is used each month. By December, the prepaid asset is gone and all $12,000 has flowed through your income statement as an expense to offset revenue earned in that same month. Why it matters: Prepaid expenses make sure your financial statements reflect economic reality, not just the timing of your payments. You match the cost with the period that benefits. ✅ Key takeaway: Just because you paid doesn’t mean it’s an expense. Prepaid expenses are assets until they’re used. Accounting that you’ll actually remember.

📚 📖 📃 Accounts Payable Process ➡️ Invoice Processing ➡️ Payment Processing ➡️ Vendor Reconciliation ➡️ GR IR Reconciliation ➡️ Travel and Expenses ➡️ AP Help Desk 📌Accounts Payable (AP) – Overview 💡1. Definition Accounts Payable refers to the amount a business owes to its suppliers or vendors for goods and services purchased on credit. It is recorded as a current liability on the balance sheet because payment is typically due within a short period (30–90 days). 💡2. Purpose To manage and track obligations to suppliers. Ensure timely and accurate payments. Maintain healthy vendor relationships. Avoid late payment penalties and take advantage of early payment discounts. 💡3. Process Flow (Procure to Pay - P2P) ✅1. Purchase Requisition – Internal request to buy goods/services. ✅2. Purchase Order (PO) – Issued to supplier, outlining quantity, price, and terms. ✅3. Goods/Services Receipt – Confirmation that items were delivered or service provided. ✅4. Invoice Receipt – Vendor sends an invoice for payment. ✅5. Three-Way Match – Verify PO, GRN (Goods Receipt Note), and Invoice details. ✅6. Payment Approval – Authorization from management/finance. ✅7. Payment Processing – Pay via bank transfer, cheque, ACH, etc. ✅8. Reconciliation & Reporting – Ensure payment matches invoices and update ledgers. 💡4. Key Documents ➡️Purchase Order (PO) ➡️Goods Receipt Note (GRN) ➡️Vendor Invoice ➡️Payment Voucher ➡️Credit/Debit Notes 💡5. Journal Entry Examples a) When invoice is received: Dr. Expense / Inventory A/c XXX Cr. Accounts Payable A/c XXX b) When payment is made: Dr. Accounts Payable A/c XXX Cr. Bank A/c XXX 💡6. Common Payment Methods ➡️Bank Transfer / Wire ➡️ACH (Automated Clearing House) ➡️Cheque ➡️BACS (UK), SEPA (EU) ➡️Credit Card / P-Card 💡7. Key Metrics in AP Days Payable Outstanding (DPO) – Average days taken to pay vendors. Number of Invoices Processed per FTE – Efficiency measure. Invoice Accuracy Rate – Fewer errors mean better processing. 💡8. Challenges in AP Invoice discrepancies (price, quantity, terms mismatch). Late or duplicate payments. Fraud and unauthorized payments. Manual processing delays. 💡9. Best Practices Automate invoice processing. Maintain vendor master data accuracy. Enforce three-way matching. Set clear payment approval workflows. Regular vendor statement reconciliations.