{"id":130,"date":"2022-04-01T13:14:35","date_gmt":"2022-04-01T13:14:35","guid":{"rendered":"http:\/\/dlga.co.za\/blog\/?p=130"},"modified":"2022-04-01T13:14:35","modified_gmt":"2022-04-01T13:14:35","slug":"profit-means-nothing-2","status":"publish","type":"post","link":"https:\/\/dlga.co.za\/blog\/profit-means-nothing-2\/","title":{"rendered":"Profit means NOTHING!"},"content":{"rendered":"<p><strong><em>What would you rather have \u2013 a profitable business or a cash cow? The one is definitely not the same as the other! Just look at Enron and the millions of \u2019Profitable\u2019 businesses that have collapsed. <\/em><\/strong><\/p>\n<p>It tires me to hear businessmen and women brag about their profits. <strong>It is the cash position of the business that counts<\/strong>. Profits can be easily manipulated either way, but cash reserves never can! The business graveyard is full of profitable businesses that have collapsed simply because they ran out of cash.<\/p>\n<p>Why is this the case? Because the guardians of the business are watching a different ball game to the one being played right in front of their eyes. \u201cOh \u2026 I watch my cash position \u2013 my bookkeeper gives me my reconciled bank balance every day\u201d is the typical, universal, response of any business guardian whose business is, or soon will be, immobilised in the mire of cash flow difficulties. People truly like to deceive themselves!<\/p>\n<p>So, what should you be doing? Manage your business on a cash flow basis! It is the business guardian\u2019s responsibility to review the true cash position for today, tomorrow, next week, next month and up to one year ahead \u2026 <strong>daily<\/strong>. You will easily identify the cash holes and you will not be tempted to spend the cash when you hit that nice peak. At the very least, you will be aware of the problems and be able to give yourself a chance to take remedial action!<\/p>\n<p>The model one builds for this is simple, but few people seem to be able to grasp the concept.<\/p>\n<p>Here is a simple formula, which will focus your fundamental thinking on managing the business on a \u2018cash flow\u2019 basis.<\/p>\n<p>The <strong>object<\/strong> of a business is to make money \u2013 right? What then is money?<\/p>\n<p><strong>Money is Cash!<\/strong><\/p>\n<p>What is cash?<\/p>\n<p><strong>Cash =<\/strong> <strong>Sales &#8211; Production Expenses &#8211; Inventory<\/strong><\/p>\n<p>Where:<\/p>\n<ul>\n<li><u>Expenses<\/u> are ALL the expenses in the business EXCLUDING depreciation because it is not a cash outlay. These expenses incorporate your fixed, semi-variable and variable expenses.<\/li>\n<li><u>Inventory<\/u> is ANY DEAD MONEY. Physical stock on hand is part of inventory, but so are debtors part of inventory, as are underutilised plant, work in progress and those plans you have for the future (always difficult to quantify).<\/li>\n<\/ul>\n<p>Every opportunity must be taken to reduce expenses and turn dead money into cash.<\/p>\n<p>This equation can be applied to any situation in the business to see whether that staff member, product, customer, activity, decision etc., is a cash contributor or a cash drainer.<\/p>\n<p>Can you see the difference between profits and cash?<\/p>\n<p>Remember that internal misjudgements are six times more likely to cause business failure than external factors. The message is clear \u2026 keep objective help close at hand at all times, and if you don\u2019t have it, get it without delay.<\/p>\n<p>The success of the business is all about you!<\/p>\n<p><strong>QUOTATION:<\/strong><\/p>\n<p>Remember: you aren\u2019t responsible for the misfortunes in your life, but you <em>are<\/em> responsible for doing something about them. (Unknown)<\/p>\n<h6>ALL CONTENTS OF THIS POST ARE COPYRIGHTED BY The Noma Asil SA Trust. ALL RIGHTS RESERVED. REPRODUCTION OF ANY PART OF THIS DOCUMENT IS PROHIBITED WITHOUT THE EXPRESS WRITTEN CONSENT OF The Noma Asil SA Trust.<\/h6>\n<h6>Nothing in this post should be considered personalised investment, legal, professional, or medical advice. Although our employees may answer your general customer service questions, they are not licensed under any laws to address your situation in any of these areas. No communication by our employees should be deemed as personalised investment, professional, legal, or medical advice.<\/h6>\n<h6>Advice and information provided in this post is not intended as, nor should it be considered as substitute for, legal, accounting, or other similar professional advice or services. Should such advice or services be appropriate, readers are advised to seek such advice or service from the appropriate professional. Further, The Noma Asil SA Trust does not accept any responsibility or liability for individual reader\u2019s particular interpretations, uses or applications of information provided, and readers of this post automatically indemnify The Noma Asil SA Trust from any such liability.<\/h6>\n","protected":false},"excerpt":{"rendered":"<p>What would you rather have \u2013 a profitable business or a cash cow? The one is definitely not the same as the other! Just look at Enron and the millions of \u2019Profitable\u2019 businesses that have collapsed. It tires me to hear businessmen and women brag about their profits. It is the cash position of the &#8230;.&nbsp;&nbsp;<a class=\" default\" href=\"https:\/\/dlga.co.za\/blog\/profit-means-nothing-2\/\">Read More<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"pagelayer_contact_templates":[],"_pagelayer_content":"","footnotes":""},"categories":[3,8,4,6],"tags":[],"class_list":["post-130","post","type-post","status-publish","format-standard","hentry","category-business","category-management","category-operations","category-cash"],"_links":{"self":[{"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/posts\/130","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/comments?post=130"}],"version-history":[{"count":1,"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/posts\/130\/revisions"}],"predecessor-version":[{"id":131,"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/posts\/130\/revisions\/131"}],"wp:attachment":[{"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/media?parent=130"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/categories?post=130"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dlga.co.za\/blog\/wp-json\/wp\/v2\/tags?post=130"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}