It’s frustrating, isn’t it? You’ve been watching the sales roll in, you’ve been keeping a close eye on expenses and your month-end report shows a healthy profit. But there’s nothing in the bank! How does that happen? You ask ‘where did our money go?’.

One of the things we learn as we graduate from doing our finances on the back of an envelope to using a proper accounting system is that timing doesn’t always line up neatly. This report helps you to understand what will cause those timing differences (and almost always they are timing differences – making a profit will increase your bank balance eventually!)


What does the Where Did Our Money Go? Report include?

In the “Where did our money go?” report there is a summary of your business’s profit and loss which allows you to see basic income and expenses at a glance. The report provides sources and amounts in the “where our money came from” and “where we’ve spent our money” sections leaving a report summary at the end “how this affected your bank”.

To start off with, the section on “Where our money came from” shows how you’ve funded the business. It will show things like:

  • An increase in loans or credit card debt
  • A reduction in debtors (because you’ve collected more than you have invoiced)
  • Any increase in what you owe for GST/VAT or taxes
  • Disposals of fixed assets.

In return, the “Where we’ve spent our money” section shows that balance sheet accounts that have drained your bank. These could be:

  • Transfers to other bank accounts
  • Purchase of plant and equipment or motor vehicles
  • Repayment of loans


The Invisible Accountant-Where Did Our Money Go Report



Why doesn’t profit equal bank movement?

As we noted above, it’s all about timing:

  • An increase in Debtors (or Receivables) suggests you’ve made sales but your customers haven’t paid you yet. Can you improve your collection systems?
  • An increase in Creditors (or Payables) means you’ve bought goods or stock and not paid for them yet. Be aware that these will affect your bank in the next month or two.
  • Stock movements can be significant for some retailers and manufacturers. You may have purchased stock in preparation for a busy season, or run down your existing inventory.
  • Loan repayments will come out of your bank account each month but only the interest component affects your profit and loss.
  • For sole traders, Drawings shows what you’ve taken out for your own use. You obviously need to live and eat but it’s not good to take out more than your profit on a regular basis.


Use the Where Did Our Money Go? report to grow your understanding of your business. You don’t need a degree in accounting or to even understand much about debits and credits but keeping an eye on the whole business will make you a better decision-maker.