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Operating in the RED

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daisy1

Active member
So my accountant called me the other day and said we were operating in the red all last yr, Im like WHAT, how is that possible when I have been giving them all the figures, sales etc. never borrowed any money from anywhere, all bills have been paid, according to my records we did VERY well last yr compared to the previous 4 yrs. Im confused as h…ll :?

How can you operate in the red when your checking account is in the black ??
 
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A quick look at your P & L should tell you…Does your accountant keep your books in a program you have access to?..This is a must as you need to look at your numbers almost daily to see where you are at…
 
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Perhaps its something like you had 20k in the bank last year and now you have 10k? You have paid all bills and not borrowed money, but you WERE in the red. Just not bankrupt yet…
 
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Are you paying yourself? Is that before or after the numbers reported by the accountant?

Depreciation and Amortization are non cash charges that can create a loss for tax purposes while a business still has positive cash flow.
 
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I would guess that he’s including depreciation into the picture but is it possible that your liabilities were very different at the end of the year as opposed to the beginning of the year? If he’s using a cash basis as opposed to accrual basis, just where you are in your cycle can have a great impact on your P and L. At any given time my current liabilities could be dramatically different from another time. Am I totally up to date with my food supplier of did I forget to send a check out and have now pushed my 14 day terms to 21 days and owe them 20K? Was payroll deducted yesterday or will it be deducted tomorrow, making a 15K difference in bank account. Has rent and utilities been paid or are they both due? If everything lines up, there might be a 40K+ swing in my account between one day and the next making a big difference in a P and L statement.
 
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