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”.

Category: CFO Consulting
Author: Shivam Khanna

15th November, 2018, Thursday: A management information system (MIS) refers to a dashboard or computerised database of financial information and reports produced regularly on operations for every level across the organisation to appraise the management of the performance. It is an important tool to be used on daily basis to enforce control and maintain vigil on the operations and workforce of the company by the top executives & owners.

In an ideal scenario, your MIS should be working for you, not the other way round. If your MIS is not capable of providing you proper insights and reports as required or even worse if it doesn’t exists, then it means that the reins of your company have been set free. At some point of time, an unwarranted development in the company may act as a wake-up call, signalling the importance of such a dashboard.

If the below questions sound familiar to your daily woes, your MIS isn’t working for you:

  • What is the status of the order I received from client “ABC” last month?
  • How does the increase in price of raw material affect the sales price of my products? Am I still making the budgeted margins?
  • How much payment to creditors is due in the next week?
  • Are job cards created for the production process and how are they linked to inventory management?
  • How much production has been done by each factory operator & how do I justify their payrolls?
  • Where does the petty cash go and who approves any substantial payments?

At Cashcow, our CFOs help the clients to develop a robust MIS based on accurate data. We first understand the information & control requirements of management and use this as a basis to create dummy reports. Apart from the requirements of the management, our team also comes up with inputs for additional reports and insights (based on our experiences & industry standards) that can enhance the control exercised by the management.

All the information & data required for the reports are directly sourced from the ERP or accounting software to avoid any tampering or inaccuracy in the data. The model is shared with the ERP vendors to incorporate in the existing dashboard or is developed by the team on in-house software (including excel). After testing & trial runs the same is deployed to be used by the management.

Few benefits of an active MIS are:

  • Companies are able to identify their strengths and weaknesses due to the presence of revenue reports, employees’ performance record etc. Identifying these aspects can help a company improve its business processes and operations.
  • Giving an overall picture of the company.
  • Acting as a communication and planning tool.
  • The availability of customer data and feedback can help the company to align its business processes according to the needs of its customers. The effective management of customer data can help the company to perform direct marketing and promotion activities.
  • MIS can help a company gain a competitive advantage.
  • MIS reports can help with decision-making as well as reduce downtime for actionable items.

Get in touch with us at Cashcow Consulting to learn how we can bring a difference to your organisation. We look forward to talking with you.

Category: CFO Services
Author: Shivam Khanna

7th November, 2018, Wednesday: The concept of a CFO is highly misunderstood and a grey area in
India, particularly for the mid and small segment companies. While your accounts department and
the auditor (CA) of an organisation take care of the accounting and compliance aspects, a Chief
financial officer (CFO) is the officer of a company that has primary responsibility for managing the
company’s finances, including financial planning, management of financial risks, treasury duties,
economic strategy and forecasting. These financial aspects are highly underrated in the SME
segment, which brings us to you.

What are CFO services and why you need them?
With growth, every organisation witnesses increase in number of processes, hierarchies and complex operational structures. At this juncture it usually becomes difficult for the promoters to keep a tab on all cost centres and micromanage operations. Thus, they tend to lose focus on the core area of business development. This brings in the need for CFO services in an organisation. An “external CFO” takes care of all such aspects and brings out the efficiencies in an organisation by actively engaging in ground level change implementation.

CFO Services are like “Renting a CFO”
Newer and smaller businesses don’t always have enough work for a full-time CFO, but that doesn’t
mean they don’t need access to a CFO’s skills and talents. In fact, when you’re first growing your
business, you need CFO services more than ever. CFO services allow you to leverage the services of
your accounting department. You get access to all that a CFO can do, but only to the extent you
need it.

Conventional CFOs vs. Cashcow CFO Services:
CFOs of most companies are very highly qualified individuals (MBAs from IIMs etc., CA rankers etc.).
Such high qualification comes at humongous cost which is out of reach for a growing organisation.
Cashcow CFOs are not just individuals working for you, rather a team of CAs and MBAs who
collectively bring in ideas, expert insights and exquisite business solutions, delivered by a
professional stationed at your premises. All this comes at a fraction of cost to conventional CFOs.

Cashcow CFOs form an extension of its client’s management team as a “Strategic partner” to foster sustainable growth by, firstly, defining a Target operating model (TOM) with a 3-5 year strategy;
based on accurate information and, secondly, developing a methodological framework for process
optimization and ensuring its implementation in organisation’s daily practices at the ground level, to bring out our signature threefold efficiencies:

  • Process Efficiency
  • Financial Efficiency
  • Manufacturing Efficiency

This helps our clients with multiple benefits like improved profitability and sustained growth in
revenues. And with our debt/ equity finance services, we help our clients with their credit score
cards (ratings) and getting them the best interest rates for their financial borrowings, which in turn
lead to significant interest cost savings. Unlike an advisory firm, we facilitate perfect implementation
and induce exclusive insights throughout your growth journey.

Get in touch with us at Cashcow Consulting to learn more about outsourced CFO services and what
they can do for you. We look forward to talking with you.

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