Business Growth Myth #2: Profits equal cash
A – I’ve no idea – I avoid looking at the numbers
B – I have some idea but it could be better
C – I know exactly where I stand and I know whats going in and whats coming out
Profit is an accounting equation – its meaningless in real life, as it doesn’t put money in your pocket. Profits don’t pay the bills therefore its not a good great indicator of your businesses performance. Focusing only on profitability is like counting your chickens before the eggs hatch.
It gives you a warm fuzzy feeling but at the end of the day you still have no chickens and the eggs could be bad eggs and may not hatch at all.
Profitability is meaningless if not backed by a healthy cash-flow plan.
Without cash, you cannot meet your financial commitments to supplies, staff etc.
Without cash you cannot invest and you certain would be open for very long. Every things else is MEANINGLESS in business if there is no cash.
Maintaining a healthy cash-flow should be every small business single priority.
Monitor your cash statements daily/ weekly to know exactly where you stand.
We should all be aiming for Option C above. That way we’ll not get caught out and will always be focused on the right things.