Setting up the Cash Flow Template

I often ask my students the hypothetical question…what would you find most important in running a business…ever increasing cash or growing profits?    

Some  are convinced it is  profits.  Make no mistake, making and growing profits are of great importance, however ‘cash is king’! 

A business with growing cash has tremendous flexibility in expanding its products and service lines, making Investments and carrying out expansion based on set objectives. 

Profits on the other hand can be made up of cash revenues but also with revenues generated from credit accounts. 

The problem is that, over time some of those credit accounts will inevitably go bad and overstate a company’s profits in the short, medium and long term.

With cash, you record inflows in real time and as received. There’s no second-guessing…a buildup of cash is real and gives the company the kind of flexibility that it needs to execute its plans without the delay of seeking funding and incurring interest expense charges for the use of the funds.

So what do you say…cash or profits? Leave a comment below!


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