Turning Black Ink Into Gold

The tacit assumption among business owners and their bookkeepers generally seems to be that the primary objective of financial performance reporting is to facilitate the production of an income tax return. To this end, the primary objective of the income statement is to report the company’s net profit. This assumption is misguided. The primary objective of the income statement should be to report the company’s cash flow. Quoting Dr. Pablo Fernandez, recognized as among the world’s leading authorities on business valuation

“There is a financial accounting maxim which, although it is not absolutely true, comes very close to it and which is a good thing to remember, net income is just an opinion, net cash flow is a fact”

According to Robert Trueblood who led a distinguished body of accountants to study the subject of what information users of financial statements really need the most, their final conclusion was both simple and clear: a need to get a handle on anticipated future cash flows

The purpose of Turning Black Ink Into Gold is to show small business owners how high-quality financial performance reporting can improve their company’s profitability and market value