Blog & Resources
Revenue is Vanity; Profit is Sanity; and Cashflow is Reality.
Often people will measure the performance of their business on its turnover, ‘We had a great month we turned over 1.5 million’.
While increasing your sales may be healthy for your business and it can increase your profit, it is vital that it be considered with other measurements such as gross profit; net profit and cash position. Many failed businesses have increased their sales into bankruptcy as they have failed to account for their costs, margins and cashflow.
Profit takes into consideration your fixed and variable costs and will give a better picture of how you are travelling, however a business at the end of the day will survive of its cash reserves, not its profits.
Cash is fact and unlike sales and profit it cannot be manipulated. Knowing a cash position or likely cash position is vital to a healthy business.
Your Cash Conversion Cycle (CCC) is a great measurement for monitoring your cashflow performance.
Profit is opinion – Cash is fact.
If you would like to discuss further please contact us:
McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
Phone +61 3 9428 1062
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