Difference Between Bank Accounts and Balance Sheets

I am an auditor besides being a governance expert.

When I present the financial statements to the board of directors I can see the blank stares, unless of course we are on Zoom and they have their video turned off. I could talk for a long time about what the board should be looking for when they review the balance sheet, but we don’t have that kind of time. How about discussing the most important thing?

The board should concern themselves with whether or not the organization has enough cash to pay the bills that are owing.

Specifically whether or not there is more cash in the bank than there are accounts payable. You will find the cash balance at the top and the accounts payable at the beginning of the liability section. If the cash is less than the payables, the board has something financial to discuss.

Too often people look at the balance in the bank account and think all that money is available, and spend it on something else without considering what might be owing.  Looking at the balance sheet will prevent the board from making that mistake

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