In short, cash flow is more important than profit. Without an even and predictable flow of cash into a company, you can’t cover your overheads, pay your employees or run day-to-day operations – let alone even think about expanding and growing the business. Essentially, profit can mean nothing if you haven’t got the cash flowing to keep you going. Cash flow is the lifeblood of any business.
However, profit and cash flow aren’t mutually exclusive — what’s needed is a healthy cash flow position AND a good focus on driving profits. Here are some key things to understand about profit and cashflow:
Profit is a by-product of a successful business
You want to make profit, but profit shouldn’t be the only goal. You want stable and consistent cash flow which may not be simple to achieve just because a business is easily profitable.
Manage your expenses carefully
Obviously, cash inflows are better than cash outflows, so managing costs and terms of credit is critical. Consider improving your cash flow position by choosing value-for-money suppliers and negotiating better deals that will bring your cost base down.
If cash flow is healthy, a profitable business will become a shining star
It’s simple — if you achieve the ideal cash flow position, the company can sit on solid financial foundations and the cash is available for investment. That’s how you grow your business!
Whether you’re new to running a business, or a seasoned owner who needs some financial support, we can give you the cash flow advice you need. We’ll review your finances, delve deep into cash flow and come up with key ways to increase cash income and reduce cash expenses. It only takes a few small changes to achieve a far better cash flow position for your business – helping you maintain positive cash flow AND generate meaningful profits. Get in touch with us today.