Category: Knowledge Series-2
Author: Giridhar Narayanan

2nd July, 2019, Tuesday: Picking up further from where we left off (, let’s dive right into the current liabilities section of the balance sheet. Current liabilities represent all short term sources for the business. Let us explore each one of them in detail:

Sources of Funds (Liabilities)
Short Term Sources (Current Liabilities) Amount
Working Capital Finance From Bank
Creditors (for goods and expenses)
Advance from Customers
Provision for taxation
Other Statutory Liabilities
Total Short Term Sources (A)

Working Capital Finance from Bank:

Working capital as you might have been told/heard is the funding required to keep the day to day operations of the firm running.

Now the question arises as to why is funding required for everyday business. The answer to that is that the funds you have pumped into business (your capital) is tied up in receivables (debtors) and/or stock and any other current asset.

Let me elaborate on it and take it a bit further. Any firm that does business will be booking sales and if that particular sale is on credit of say 2 months to your customer, you will be realising the money from that sale from that particular customer only after 2 months. For example, assume that the business has generated sales of Rs.100 in the month of April, which will be realised in the month of June ( as there is a 2 month credit). In this scenario, the business needs to pay its day to day operational expenses like salary, rent , electricity etc for the 2 months (April and May) where the business’s capital is stuck with the customer in the form of receivables and would require financing for this interim period. This is working capital and bank’s provide finance for the same at an agreed upon interest.

Although from an organisation standpoint , the funds invested in entire current assets (receivables, stock, statutory receivable, advance tax paid etc) form a part of the working capital requirement, Bank’s generally only finance funds that are tied up in the form of receivables(debtors) and stock (inventory). In some cases, Bank’s can fund other current assets, like the recent example of some bank’s rolling out a special scheme towards funding GST receivable for Exporter’s. But this is an exception rather than the norm.


Creditor’s is the accounting terminology for suppliers who are yet to be paid by you. Creditors can further be classified as creditors for goods or creditors for expenses, depending upon what they are supplying or the service they are dispensing. They act as a source of working capital finance for the business.

For example, if the business has purchased stock (be it Raw Material, Consumables, Packing Material etc) worth Rs.100 on credit, the supplier finance’s the purchase of stock thereby replacing the business’s capital to be allocated towards the same, thus acting as a source of short term funding for the business.

Advance from customers:

As the name suggests, this represents the advance you collect from your customers before starting the job in some cases, but most definitely before raising a sales invoice in favour of your customer. Effectively your customer funds a part of your job requirement and thus acts as a source of short term funding. Upon job completion and receipt of payment from the customer, the advance is adjusted against the total invoice amount receivable from the client.

Provision for Taxation:

This represents the outstanding income tax that needs to be paid to the government as on the particular date when the balance sheet is prepared.

Other Statutory Liabilities:

This is similar to the Provision for Taxation except that this represents all the other statutory liabilities like GST, Provident Fund (PF), ESIC etc that needs to be paid to the government on the particular date that is balance sheet is prepared on.


This represents any other short terms source of funding or all other short term payables apart from the ones mentioned above that is outstanding as on the date the balance sheet is prepared.

Category: Knowledge Series-1
Author: Giridhar Narayanan

17th June, 2019, Monday: For most of the small and medium business owners, or should I say, technocrats, the word “Balance Sheet” only exists because there is compliance around it from the governmental agencies and it is the sole purview of their auditors to prepare the same. They just about imprint their autographs on it (sign it) and relegate it to the reams and stack of files for their accountant to maintain.

The truth can’t be any more different. But, the Balance sheet is a reflection of where the business currently stands – Combined with Profit and Loss Statement, the Balance Sheet is numeric representation of all the operational activities that you’ve undertaken in your business. Isn’t that what the owner’s and the managers in any business would want? – to know the company’s operational standing at any given point in time. Given that this is exactly what a Balance sheet does along with the P&L , it might seem ludicrous to not to refer to the same as point of reference for future decision making activities.

Let us demystify what the Balance Sheet does!
The Balance Sheet is simply a table which provides you with the sources of funds, known as Liability and application of funds, known as Assets. To illustrate this better, let us assume that you have invested Rs. 100 in your business at the start, the balance sheet (the firm’s balance sheet) will tell you that on the Sources of funds (Liability), it has Rs.100 earmarked under capital and application of funds side (Assets), it has Rs.100 sitting on it’s bank account.

Sources of Funds ( Liability) Application of Funds (Assets)
Cash in hand / Bank

So you can see that at any point in time, the sources of funds must be equal to your application of funds i.e. the two sides of the Balance Sheet namely Assets and Liability Always add up to the same amount.

The above table is a very basic / primary illustration of the how the Balance Sheet works, however the logic behind recording all the other more complex transactions is the same.

Let’s delve a bit into further detailing of the components of Balance Sheet and how it is structured. As we have understood from the earlier explanation, the Balance Sheet is split into Liabilities and Assets. It can be further classified into Short Term & Long Term Sources and Application of Funds. The Illustration of the same is given below:

Sources of Funds (Liabilities) Application of Funds (Assets)
Short Term Sources (Current Liabilities) Amount Short Term Application / Uses ( Current Assets) Amount
Working Capital Finance From Bank Cash/ Bank
Creditors Debtors
Provision for taxation Inventory
Other Statutory Liabilities Advance Payment of tax
Advance from Customers Advance to Suppliers
Others Others
Total Short Term Sources (A) XXX Total Short Term Uses (A) XXX
Sources of Funds (Liabilities) Application of Funds (Assets)
Long Term Sources (Non – Current Liabilities) Amount Long Term Application / Uses ( Non – Current Assets) Amount
Capital Fixed Assets
Reserves and Surplus Security and Deposits
Share Premium Other Investment
Term Loan Loans and Advances
Unsecured Loans from promoters & family Debtors > 12 months
Total Long Term Sources (B) XXX Total Long Term Uses (B) XXX
Total Sources of Funds (A+B) XXX Total Uses of Funds (A+B) XXX

The knowledge on the various components mentioned in the Balance Sheet and what they represent have to be gained before one can confidently start deciphering what the Balance Sheet states. This has to be done independently to start de-coding the picture that the Balance Sheet is painting.

The purpose of this article is only to start you on your journey of understanding what the Balance Sheet represents. Hope we have steered you in the right direction and you have successfully taken your first step towards unravelling the “Balance Sheet Mystery”.

Thank You For Your Information !

We Will Get Back To You At The Earliest !

Archana Trimbakkar

Archana Trimbakkar has over 7 years of financial experience with expertise in accounting, record keeping, managing information technologies, compliance, and report compilation.

Accounting| Reconciliation | Financial Statements Compliance | Book-Keeping

Archana Trimbakkar


Education & Experience

  • University of Mumbai
  • Over 7 years of financial experience

About Archana:

Archana Trimbakkar has over 7 years of financial experience with expertise in accounting, record keeping, managing information technologies, compliance, and report compilation.

Prior to Joining Cashcow, Archana handled accounts and compliance for various clients at an accounting services firm.

Archana is fond of swimming and listening music in her leisure time.


Clearship Freight fowarders PLC

R. Radhakrishnan

(Chairman, Clearship Group)

"Our association with Cashcow Consulting for the past 5 years has been deeply rewarding. They have made a significant impact in the way Clearship Group has been borrowing from banks, bringing in their expertise to help us to firstly determine our optimal working capital requirements and secondly, going ahead and arranging it through the banks at the lowest interest rates possible.

We wish them all the very best in all their future endeavours and looking forward to keep our symbiotic relationship going."

Rich Offset India

Tushar Shah

(Director, Rich Offset India)

"Cashcow Consulting has made a tremendous impact in the time we have been associated with them. They have been thoroughly professional in their approach and their CFO's have gone about setting up system's and process's which has gone a long way in improving the financial efficiency of the company.

I can confidently say that they are now a permanent fixture in the company and we look forward to a long innings with them."

Malhar Décor LLP

Sneha Rane

(Partner, Malhar Décor LLP)

"Cashcow Consulting has done a very professional job in terms of going about setting up the processes in the firm. These processes allowed for the seamless flow of data right from material procurement to production to inventory to sales in a timely and accurate manner. Armed with these data points, Cashcow Consulting appointed CFO's have been able to provide us with timely reports for management discussion thereby impacting process, product mix & distribution strategy to improve the overall financial health of the firm.

Cashcow Consulting has NOT played an advisory role, but that of an 'Active Implementer' getting the buy in from all our employees along the way. They are now very much a part of the management team and we would wholeheartedly recommend them to any of their prospective clients."

Happy Clients


Million Funds Raised


Days Worked


Years of Team Experience


Current health check-up

Cashcow’s expert approach is to analyse the current financial health and prospects of the ‘opportunity’ though various ratio’s run over a proprietary score card. The report of the same, points to the current weakness and strengths. Understanding the value proposition that amalgamation would bring in the current market is the deal maker.

Long term Forecast & Budgeting

To evaluate opportunities and growth plans, it is necessary to prepare forecasts and budgets. These help us understand the business better and provide a stronger basis for deciding the strategy of the merger and acquisition companies to achieve its goals. Cashcow consulting provides the management team with valuable reports that act as input for product pricing, finance requirement for project execution and necessary capacity utilisation for break even. The team has done Techno Economic Viability (TEV) & Valuation for numerous mergers and acquisition companies and that forms the backbone for recommendations.

Raising finance for Acquisition

Size of the project determines whether existing reserves are sufficient or the methodology for raising term debt gets defined. Cashcow Consulting is equipped with a professional debt raising team with almost 25 years of experience amongst them. The team decides various modes of raising finance either through domestic or foreign currency based term loans or External Commercial Borrowing (ECB) from abroad, or through part cash and part shares swap. Basis fund flow analysis and long term forecasting the required structuring of the debt is undertaken to ensure better risk management for repayment. Term debt is always accompanied by enhancement in working capital. 
Read more about working capital finance here.

Strategic Mergers and acquisitions

Every business owner, at some point of time, has to answer the below critical questions:
  • How to scale up a small business to a big one? or,
  • How to grow the existing one at an accelerated pace into a position of dominance?
The answer to above requires meticulous planning, data backed decision-making and successful execution of any growth strategy. 

Every growing mergers and acquisition companies with surplus funds may look at expansion via an inorganic or organic route. Alternatively, backward or forward integration of the product lines can bring significant value to the organisation. Each growth strategy comes with its own risk and rewards. Mergers and acquisition companies that grow inorganically, can gain access to new markets, improved revenue streams and better technology, through successful mergers and acquisitions companies, but on the flip side the challenges of size-management & culture-blending need to be addressed too. Organically growing, on the other hand is more like gulping what can be chewed and that requires time and patience to nurture, flipside being the market and competition, not providing the comfort of time. 

To make such critical decision Cashcow CFOs provide you with best insights and advisory. Our market presence & regular interaction within our strong network makes us continuously aware of unique opportunities that arise, we ascertain the value proposition basis SWOT, using available data. 

Long term Forecast & Budgeting

To evaluate opportunities and growth plans, it is necessary to prepare forecasts and budgets in order to know about the cash credit and overdraft situation of the company. These help us understand the business better and provide a stronger basis for deciding the strategy of the company to achieve its goals. It is basis the above that the surplus long term funds available with the organisation at any point of time gets highlighted.

Analysis of the existing financial statements allows us to understand the manner in which a particular source of fund i.e cash credit and overdraft has been utilised by the organisation. Any diversion of the same needs to be corrected while completing the forecasting exercise. Cashcow consulting brings in tremendous experience in executing long term forecasts that corrects the wrongs of the past while incorporating the growth strategy that the company is going to embark on.

Raising working capital finance

Financial institution is every organisation’s partner in growth. Cashcow’s debt team, with an overall experience of over 25 years, is fully equipped to raise the working capital finance from the best of financial institutions in India or abroad. Our experience enables the best of possible structuring coupled with the best of financial terms from the respective institutions. The team has handled mandates in excess of INR 20 billion on raising working capital finance till date.

Raising Debt

The size of a project determines whether the existing reserves are sufficient or would it require raising long-term debt. Cashcow Consulting is equipped with professional team with almost 25 years of experience in debt-raising. The team has raised domestic and foreign currency term loans as well as External Commercial Borrowing (ECB) from abroad. Basis fund flow analysis and long term forecasting the required structuring of the debt is undertaken to ensure better risk management for repayment. Term debt is always accompanied by enhancement in working capital.

error: Content is protected !!