Profit or Cashflow? Which should I focus more on?

All businesses want one thing: Profit. This is the heart of running a company. But, profit is not the only financial focus you need to consider if you want a stable and long term business.

Cashflow, on the other hand, is the beating heart of your business. Without an equal and predictable flow of cash into you business, overheads won’t be covered, employees will not be paid, and your day-to-day operation is not possible.

In short, profit and cashflow is equally important in your business.

Here are some key points to understand your finances.

Profit is not the most important thing – we want profit but it isn’t the only goal. You business can be profitable but in can be highly unstable in the long run. What you need is stability and consistent revenues.

Cashflow is what keeps your business alive – income serves to bring cash into your business. Without cash, you won’t be able to operate. It is what makes your business up and running.

Know your cost base and overheads– cashflow also means costs and you want more cash inflows rather than cash outflows. It is essential to keep track of your expenses and costs to manage them carefully.

Be proactive about spend management and easing expenditure – actions that reduce spending is a positive thing for your cashflow position. If you can choose cheaper suppliers or negotiate better deals that will make your expenses lower, then it is best for your business.

Push more revenue, out of increased sales and marketing activity – it is also important to be practical about running sales and marketing campaigns to increase your sales and by doing this, you can increase your revenue and therefore boosting your cashflow too.

Keep the cash flowing and the profits take care of themselves – if you have finally achieve the ideal cashflow position, your business then sits on a solid financial position and the cash is there for investment and your business can grow!

Whether you’re new to running a business, or a seasoned owner who needs some financial support, we can give you the cashflow advice you need. Get in touch with us and let’s talk through your cashflow concerns by calling us at 44 (0) 1892 807 001 or email us at accounts@nayloraccountancy.com.