Companies cannot live on profit alone!
Why cash (as well as profit) should be top of the agenda throughout your business’ life-cycle.
Many business owners start out with a focus on growing turnover and profit. We all know the saying: ‘profit’s sanity, turnover’s vanity’ etc. but in reality, it runs much deeper than that. Profit can rapidly turn to insanity when it’s sat in somebody else’s bank account.
Let’s make no bones about it: however profitable your business, if you run into cash-flow problems you can still go bankrupt. While that is an extreme ending, the point is that poor cash flow can seriously hinder your ability to reach your goals, not to mention the huge stress added and time wasted by chasing payments – or worse – pursuing a bad debt through the courts.
Cash flow is not just about chasing money, it’s about raising invoices quickly and managing expenses so you can charge them to the relevant job. It’s about taking credit card payments, setting up Direct Debits with your customers and, of course, managing your workflow.
Whether you’re using Xero or another cloud-based system to manage your day-to-day accounts, there is a plethora of ‘add-ons’ to help you manage your business more efficiently and get your money in much, much faster.
If you still need convincing, check out the difference 30 debtor days can make to your bottom line and company value – not to mention retirement age! Check out our tips to significantly increase your wealth.
And remember: profit is essentially how much money you’ve got after you’ve collected all your debts and paid your expenses. Until you’ve received the money, however, that profit is just a number. That’s why, as they say, cash is King, ahem, Queen – see our blog 4 reasons why cash is Queen (not king)!
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