As you will see from the discussion on financial analysis in the next chapter, the three financial statements are linked. Adding assets or liabilities directly affects cash flow; profits or losses directly affect the balance sheet. It is possible to have cash and no profits, and it is possible to have profits and no cash.
The relationship between the two depends on whether your business is growing or shrinking and whether you are paying attention to the fundamentals of financial management when you evaluate your success.
There are times when it is acceptable to have the relationship between profits and cash out of whack, as long as the condition is not chronic. But in the long term, the goal should be to achieve harmony in your financial statements. That harmony is measured by:
As you begin to apply discipline to the financial management of your practice, you will also begin to see how such discipline affects your ability to provide the ultimate client-service experience. A growing, profitable enterprise has the financial resources to reinvest in the knowledge, technology, and tools that will make it easier for clients to do business with it. Furthermore, having a financially successful enterprise will help ensure that your focus as an adviser is on your work and not on your own financial needs.
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Business Management For Financial Advisers Tutorial
The Financial Advisory Business
Defining The Business
The Value Of Surveys
The Challenge Of Growth
Human Capital: The Fulcrum Of Strategy
The Care And Preening Of Staff: Professional Development
The Payoff For The Firm: Compensation Planning
The Tools That Count: Financial Management
The Other Dirty Words
Referrals And Joint Ventures: The Search For Solutions
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