Profit is a matter of opinion, cash is a statement of fact. We live in unprecedented and uncertain times, bouncing around recession with record insolvencies and consumer spending declining.
Operating in this environment depends upon cash management – of which profit is only one part. For a business to survive it needs to have daily reporting systems on the cash fundamentals of the business, such as how much is being collected on your company’s sales ledger, how much has been spent on its purchase ledger and what is happening to longer term cash requirements of the business such as inventory levels. Any one of these areas can cause tremendous problems for the business and it is so important that these good and professional reporting systems are in place in any company and swift action is taken when adverse variants are discovered.
As well as daily reporting, weekly profit and cash flow projections rolling out for six months by week should be in place so that reporting not only becomes reporting but a very proactive tool for business survival.
I have great experience in managing in a recession. I bought my first business in 1991, raising £2m and interest rates went from 5 – 15% in the space of two months. This experience is not learnt in a text book and is invaluable in helping manage companies competitively to ensure their long term prosperity and survival.