All those other rows on the money coming in are about other ways that you might get money into your company from something other than sales. The illustration shows these category rows and you can see that new borrowing, new investment, and even sales taxes collected are other ways you get money.
Money off the income statement
What all these other elements have in common is that they are ways your company gets money that doesn’t show up in the income statement.
I don’t want to get into accounting jargon. The rest of these rows will look fairly simple to you if you’ve dealt with accounting and financial statements at all, and could be daunting if you haven’t.
Tip: Calculating balances
Please notice that this table links to your balance sheet. In this example we’re adding $100 to new long-term liabilities, which goes to the balance sheet. We’re also adding $25 to the investment, which goes to the balance sheet in additional paid-in capital.
Other income is there because some companies have income from special operations, like interest income, that they don’t put on their income statement. That’s very rare.
Sales tax is there because you collect tax for the government, and you have to pay it, but it isn’t really sales or income. You’re a tax collector. So you need to keep track of what you collect.
The rest is new debt, money from sale of assets, or new investment. I should add that I use new other liabilities to keep track of debt that doesn’t have an interest rate, such as loans from founders or from your rich relatives.
The total gives you all the money coming into the company. That’s the happy first half of the cash flow. Now we need to look at what we’re spending.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
