Cash is definitely King, especially in these tough times. Something we get asked many times is what’s the difference between profit and cashflow?

Net profit is what you have left after you deduct all your business expenses from all your revenue. You change net profit only by changing the things that affect revenue and expenses.

There are a few ways to change these; Let’s say you could renegotiate better deals with your suppliers, or introduce new chargeable services to clients, or introducing systems that encourage more efficient practices, these will enhance your profit, or margins.

Cashflow comes from various sources, mainly sales receipts for most businesses – however it can also cover equipment, operating expenses, repayment schedules and taxes to name a few.

It is also possible to be profitable but run out of cash, and to have cash but losing money.

Good business practice is to be financially aware, to have cashflow management processes and to use the information wisely.

 

Try this 5 essential business takeaways for success:

Protect your cash position by using current available information. Up to date cashflow projections will show the position of your business.

A reasonable cash buffer is recommended, Ideally by having a 2 month pot for unforeseen circumstances.

Be realistic with income projections and take immediate action if sales income is unlikely to meet costs.

Credit check where possible. While this is sometimes historical data, it can highlight the biggest risks early on.

Create budgets to protect unnecessary spend, and stick to them – every pound spent reduces cash reserves which could be used for more important investment.

Looking to improve cashflow? We are here to help. Contact us here.