Do you know where your cash comes from?

Cash Flow and profit are two very different things. If you don't understand cash flow, you're putting your business at risk. Learn why this is true in this very short video.

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Transcript:

Without cash your business won’t run, your employees become cranky and suppliers stop shipping you, and believe it or not you can run out of cash while your business is very profitable.

1. A cash flow statement tells you where the money went.

A profit and loss statement says nothing about principal payments you make to the bank.

You could have reasonably good profits, but the amount of money you pay your bank every month could be putting you out of business.

Cash flow statements tell you where you spent your money.

2. A cash flow statement can help you focus on creating excess cash.

Having profits is important. Profits are one of the things that help create cash.

Concentrating only on your profit and loss statement makes it difficult to focus on cash.

3. Cash flow statements often provide better KPI’s (Key Performance Indicators) than profit and loss statements.

This is an activity that literally every area of your company can get involved in through individual drivers.

Companies that concentrate on creating excess cash often also create better enterprise value than those companies that only concentrate on profits.

4. Cash flow statements help with financing decisions.

The question when you grow your company isn’t whether we will use cash (you will) it’s how are you going to finance your growth.

Understanding your cash flow statement will allow you to make better decisions about your business.