You’ve probably heard the old adage “turnover is vanity, profit is sanity, cashflow is king” – but what does it really mean? Well, here are a few thoughts for you.
Turnover is the lifeblood of any business, and needs to be managed effectively at all stages of your business, with issues like:
The list could go on and it’s easy to see how and why “turnover” is the biggest attention grabber when it comes to business performance, and rightly so. However, watch out for “turnover” for turnover’s sake – and don’t chase the dream of being a million pound turnover business or getting that huge contract if it’s not profitable or financeable. That’s where the “vanity” bit kicks in!
“Profit is sanity” is definitely one never to forget. Generally, we do what we do to earn money – that’s the bottom line. And it will definitely keep you sane and stop you pulling your hair out if there’s money left over, after all the bills have been paid.
So make sure your business is profitable turnover focussed, not just turnover focussed – and here’s a few tips to help with this:
But that’s not the end of the story - you’ve done all the hard work, increased your turnover profitably. But where IS your profit?
Ideally, it’s already in your bank account, but that’s not always the case, and “cashflow” begins to feel a bit tight – generally because you have paid all the overheads, bought the stock or raw materials, paid the sub-contractor etc., and you still haven’t actually been paid by your client. That’s the difference between PROFIT and CASHFLOW – the management accounts will look great but it doesn’t feel great!
“Cashflow is King” is a real true-ism and you can help manage it by:
No one ever said running a business was easy and that’s why our Business Advice service is here – to help your business look like a great business on paper – and feel like a great business in reality.
At Frost Group, we want to make things as easy as possible for you. That is why, if you can’t come to us, we’ll come to you. We operate face to face, nationwide meetings, wherever is most convenient for you.