A management balance sheet for today

What a management balance sheet is

A management balance sheet shows what a company owns and what it owes on a given date. Assets minus liabilities equals equity, the part of the business that belongs to the owner.

The P&L answers "did we make money this month?" The balance sheet answers "what shape is the company in right now?" A business can be profitable on its P&L and still be short of cash if clients aren't paying while salaries and taxes are already due. The balance sheet shows that at a glance.

Unlike a statutory balance sheet, a management balance sheet isn't filed with the tax authorities. It's for the owner and the director to make decisions: can I take money out, will there be enough for payroll, are clients holding too much of our money?

What's in the balance sheet in 95sales CRM

The balance sheet is always as of today. There's nothing extra to enter. If you track payments and debts, cash desks and payroll in the CRM, the balance sheet is already filled in.

How to read the balance sheet: 4 steps

1. Look at cash. Balances in accounts and cash desks are what you can spend right now. To keep account balances accurate, import your bank statements.
2. Compare cash with liabilities. If salaries payable plus taxes exceed the cash in your accounts, a cash gap is coming.
3. Check client debts. Large receivables are profit that isn't in the bank. Work through them in payments and debts and with the guide on patient debts.
4. Account for advances. Client advances are money for services you still have to deliver. Don't spend them as profit.

Who needs a balance sheet: examples

Clinic or care home. Say some families at a care home pay a month in advance and others pay late. On the balance sheet, the first show up as client advances (a liability) and the second as "Clients owe" (an asset). The director sees how much cash is truly free and how much is already committed to next month's care.

Agency. At an agency, clients often pay after the month closes, while contractors and staff need to be paid on time. The balance sheet shows whether there's enough in the bank to cover salaries payable and how much revenue is stuck in receivables.

Service business. For a service business with several cash desks, the balance sheet adds up cash at every location and money in the bank into one number, with no spreadsheet reconciliation.

Decisions the balance sheet helps you make

A balance sheet earns its place when you have a money decision to make. Three typical owner questions:

• Can I take money out of the business? Free cash is what's in accounts and cash desks minus salaries payable, taxes and client advances. If the gap is small, hold off on dividends.
• Will there be enough for payroll? "Salaries payable" comes from the payroll sheet and sits right next to your balances.
• Are clients holding too much of our money? If "Clients owe" grows faster than revenue, you're effectively lending to clients. Time to revisit payment terms.

The CRM doesn't keep a history of balance sheets, so it's worth noting equity yourself, for example on the 1st of each month. If it's growing, the business is building reserves. If it's shrinking, it's eating into them.

Balance sheet vs P&L vs budget

• Monthly P&L: results for a period, including income, costs, profit and profitability.
• Budget vs actual: whether the company is within this month's budget.
• Balance sheet: the position today: what we have, what we're owed and what we owe.

All of them use the same transactions, so they don't contradict each other. For how they fit together, see the guide management accounting for agencies and clinics.

Where the balance sheet is available

The balance sheet works together with the monthly P&L, budget vs actual, counterparties and bank statement import. Only roles with finance access can see it, for example the owner and the finance director.