“To be sustainable, your business must produce positive cashflow from the operations of the business .” - Keith Cunningham

Introduction:

When it comes to running a business, profit and cashflow are two crucial aspects that need to be managed well. A profitable business does not necessarily mean it has a positive cash flow. In fact, many businesses fail despite having high profits, simply because of poor cash flow management. In this blog, we’ll explore why cash flow is more important than profit in business, and how improving cash flow can help a business grow.

With that said, here are 5 reasons why you prioritize cash flow over profits! 👊

1. Cash flow is the lifeblood of a business:

Cash flow is the money that flows in and out of a business, and it’s essential for the day-to-day operations.

A positive cash flow means that a business has enough money to pay its bills, make investments, and meet unexpected expenses.

Without a positive cash flow, a business may struggle to keep its doors open, even if it’s making a profit. In other words, cash flow is the lifeblood of a business.

2. Profit is a measure of success, but cash flow is a measure of survival:

Profit is essential for a business’s long-term success, but cash flow is necessary for its survival.

A business may have high profits, but if its cash flow is negative, it may fail to meet its financial obligations, such as paying suppliers or employees, and may be forced to shut down.

Therefore, focusing on cash flow should be a top priority for any business owner.

3. Cash flow enables growth:

Positive cash flow gives a business the financial freedom to grow.

It allows a business owner to invest in new equipment, hire more employees, or launch new products or services.

With healthy cash flow, a business can also weather economic downturns and other unexpected events, such as natural disasters or pandemics.

4. Cash flow management requires planning and discipline:

Improving cash flow requires planning and discipline.

Business owners should review their cash flow statements regularly, forecast their cash flow needs, and create strategies to ensure their cash flow stays positive.

Some strategies may include asking for deposits, offering financing options, or renegotiating payment terms with suppliers.

Cash flow management is not just about increasing revenue. It’s about managing expenses, collecting payments, and staying organized.

5. Technology can help improve cash flow management:

Managing cash flow can be challenging, especially for small businesses with limited resources. However, technology can help streamline the process and make it more manageable.

For example, accounting software can automate invoicing and help business owners keep track of their expenses.

Cash flow forecasting tools can help predict cash flow needs, and online payment systems can speed up the payment collection process.

Technology can also provide real-time data, allowing businesses to make informed decisions about their cash flow management.

Conclusion:

In conclusion, cash flow is more important than profit in business, and improving cash flow is crucial for a business’s survival and growth.

Business owners need to understand the difference between profit and cash flow and prioritize cash flow management.

By reviewing their cash flow statements regularly, forecasting their cash flow needs, and implementing the right strategies, small business owners can improve their cash flow and ensure their businesses thrive in any economic climate.

Remember, positive cash flow is the lifeblood of a business, and it’s essential for staying afloat.