The P&L Head-Fake
Attn. Startup Entrepreneurs, don’t get distracted:
What is The P&L Head-Fake?
Sometimes it is known as the P&L Shell Game.
Profit:
We entrepreneurs need to manage our companies to make a profit.?Without profit, we will not be in business very long.?We need to keep our eye on the ball.?In the case of startups, the ball is profit.
Accrual accounting is useful. I have used it in several of my startups. However, it can lead you astray.
Consider the following accrual accounting issues:
1.???When you use cash from your bank account to buy inventory your profit does not change. But the cash you put into inventory is no longer available for payroll, marketing, or other operational activities.
2.???Profit in accounts receivable is not available for any operations.?Financing via Factoring may be an exception.
For Founders, I recommend focusing on two things: cash in your bank account and accounts payable.?
1.???The cash in the bank is a measure of the current financial health of your business.
2.???On the other hand, Accounts Payable is a measure of the future?financial health of your business.
I wish you the very best.
Dick Van Antwerp Contact me here:?https://bit.ly/3pCeSHY
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