Liabilities are the claims against your business's assets. The difference between assets and liabilities is equity — what's actually yours.
Current vs. long-term liabilities
Current liabilities are due within the next 12 months: accounts payable, credit card balances, the current portion of loan payments, and taxes owed. Long-term liabilities are obligations due beyond 12 months: SBA loans, equipment financing, commercial mortgages.
Liabilities and cash flow
Debt repayment is one of Greg Crabtree's Four Forces of Cash Flow — the second priority after taxes. Every dollar going to loan payments is a dollar not available for operations or distributions. Crabtree recommends aggressively eliminating debt before scaling distributions.
Good debt vs. bad debt
A loan that purchased revenue-generating equipment has a different character than credit card debt accumulated to cover operating losses. Where your liabilities come from tells you something important about the business's financial history.
See these numbers in your own monthly Clarity Report.
Get Started →