{"id":53,"date":"2020-09-01T15:00:55","date_gmt":"2020-09-01T15:00:55","guid":{"rendered":"http:\/\/dlga.co.za\/blog\/?p=53"},"modified":"2020-09-01T15:00:55","modified_gmt":"2020-09-01T15:00:55","slug":"profit-means-nothing","status":"publish","type":"post","link":"https:\/\/dlga.co.za\/blog\/profit-means-nothing\/","title":{"rendered":"Profit means NOTHING!"},"content":{"rendered":"

Profit Means Nothing!\u00a0 <\/strong><\/p>\n

What is more beneficial – a profitable business or a cash cow? The one is definitely not the same as the other! Just look at Steinhoff and the millions of \u2019Profitable\u2019 businesses that have collapsed. <\/em><\/strong><\/p>\n

It is upsetting to say the least when one hears businessmen and women brag about their profits. It is the cash position of the business that counts!\u00a0 <\/strong>Profits can be easily manipulated 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

Why is this?\u00a0 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 very soon will be, immobilised in the mire of cash flow difficulties. How people like to deceive themselves!<\/p>\n

So, what should you be doing?\u00a0 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 daily<\/strong>.\u00a0 You will easily identify the cash holes and you will not be tempted to spend the cash when you hit the peak of the curve.\u00a0 At the very least, you will be aware of the problems and pitfalls and have a good chance to take remedial action!<\/p>\n

The model one builds for this is simple, but sadly, few people seem to be able to grasp the concept.\u00a0 We are not going to discuss the mechanics with you in this post, you are invited to contact us for more information.<\/p>\n

What we do want to give you is an amazingly simple formula, which will focus your fundamental thinking on managing the business on a \u2018cash flow\u2019 basis.<\/p>\n

The object<\/strong> of a business is to make money \u2013 right? So, what then is money?<\/p>\n

Money is Cash!<\/strong><\/p>\n

What is cash?<\/p>\n

Cash =<\/strong> Sales \u2013 Operational Expenses – Inventory<\/strong><\/p>\n

Where:<\/p>\n