Profitability Alone is Not a Reliable Indicator of Sustainable Business Performance

 

 

It might be tempting to measure your business performance and financial security by profitability alone. After all, profitability is a good indicator of sustainability when it comes to generating cash.

The Danger of Managing Your Business Finances Using the Bank Balance Method

However, one mistake I see many business owners make is managing their money using the Bank Balance Method – checking their bank balance every day to see if they have enough money to make it through the day. If they have enough money to pay the bills, all is good. If they’re running low, they go out and hustle for more sales. Rinse and repeat.

 

The Importance of Cash Flow Forecast for Sustainable Business Growth

 

But one thing that gets overlooked is an important factor in the business’s ability to sustain and continue over a long period of time – cash flow forecast. Having a strong cash flow means actual money in your bank account, not just a promise of money like your revenue and profit. Cash flow is not the same as profit. You can have a negative cash flow and high profit, or positive cash flow and negative profit.

 

 

A cash flow plan can predict what is going in and out and when. Cash flow is the measurement of money coming in and out of your business, and it’s three-dimensional, taking into account the inflows, outflows, and the time frame that all these transactions happen. So you can actually predict how your bank accounts will look into the future.

 

Don’t Just Focus on Revenue Goals: Prioritize Monitoring Your Cash Flow Plan

 

And having a strong cash flow strategy means bringing money in faster and spending money slower. That’s how you optimize your cash flow.

 

So, apart from looking at your revenue goals, do you prioritize monitoring your live breathing cash flow plan and make decisions appropriately? Using the bank account balance method won’t help you identify when your business is running low in cash. The option of thinking that someday you will take back control of your cash flow is not sustainable.

 

When you have a simple, well-oiled cash flow plan you can follow every month to maximize your business profits. These roller coaster cash flow months, where you’re constantly up and down and trying to make ends meet, are a happy accident, and you have little time for a personal life.

 

That’s why asking for help is so important when wanting to take care of your finances, and not just adding one more thing on your plate. If you want to feel confident again while dealing with your finances, you can get step-by-step support. No more fake it till you make it with your money.

 

Why Asking for Help with Your Business Finances is Critical for Success

 

I’ve got space on my calendar for May, so let’s connect. I’d love to support you 1-1, hear your big business dreams, and get you massively excited for the next 90 days in your business!