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Cash flow is as important if not more so than available profit. Equipment on "standby" while not being "used" is (not) an expense "depreciation wise" but you have to cash flow it thru the backside of sales receipts ... thus this is your advanced "investment" in your bizz ... long term equip being paid off before the life of the vehicle or equipment is over.
Incidentally ... when reviewing your yearly P&L check those depreciation figures carefully because many P&L's will have an (inflated) depreciation figure (written off fast) for tax purposes. When you see the line item book value ... this is cost less accumulated depreciation on the balance sheet and the question is ... is the remaining value stated realistic inflated, deflated? Rethink your P&L for "operational purposes" with that in mind.
Just as important to run a yearly cash flow as it is to run a yearly P&L otherwise known as ... where did my money go?
A lot of people who have no accounting knowledge are under the impression that a truck payment is an expense when paid which is not entirely true ... payment of let's say $500 is part principal, part interest ... interest goes to P&L as expense, principal goes to balance sheet as reduction in note payments ... the "use" part shows up as depreciation. When you first acquired the equip it went to the balance sheet under assets and liability section under notes payable. Even the interest paid portion of a monthly payment can be argued that it's really long term and not a "time related expense" ... but for tax purposes this stuff is written off.
Incidentally ... when reviewing your yearly P&L check those depreciation figures carefully because many P&L's will have an (inflated) depreciation figure (written off fast) for tax purposes. When you see the line item book value ... this is cost less accumulated depreciation on the balance sheet and the question is ... is the remaining value stated realistic inflated, deflated? Rethink your P&L for "operational purposes" with that in mind.
Just as important to run a yearly cash flow as it is to run a yearly P&L otherwise known as ... where did my money go?
A lot of people who have no accounting knowledge are under the impression that a truck payment is an expense when paid which is not entirely true ... payment of let's say $500 is part principal, part interest ... interest goes to P&L as expense, principal goes to balance sheet as reduction in note payments ... the "use" part shows up as depreciation. When you first acquired the equip it went to the balance sheet under assets and liability section under notes payable. Even the interest paid portion of a monthly payment can be argued that it's really long term and not a "time related expense" ... but for tax purposes this stuff is written off.