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Money, Money, Money…

Posted On - 04/03/2016 08:45:28

Manage Money Right

Making money: maybe not the purpose of business but a big reason you're in it.

For some, money doesn't matter much, for others it drives everything. Whether you're out to get rich or just make a living, you need to pay yourself and buy what you sell. It's no wonder money's said to be "the lifeblood" of business.

But whatever money means to you one thing's certain: it matters to your bank. Run out of cash and they'll clobber you with charges, maybe worse. Managing money right counts. Read this blog to find out how…

Turnover is vanity…

…profit is sanity; cash is reality – the "Bankers Mantra". But what's it all about? Well, turnover – sometimes called revenue or sales – is business income. And a bigger income means a better business!? Not necessarily. A business with a big turnover can still make a loss.

So that's why profit is sanity!? Yes, profitability is a great way to understand if a business is working and making money. If it's making more from what it's selling than what it's spending. But that doesn't tell you how much money it's got.

For that you need to understand cash. Ah, that's why cash is reality? Yes! Turnover and profit don't tell you what's actually happening with your bank account. That's why cash is king.

Looking in the wrong place

Bank account? Bank statement! It's reasonable why people think using theirs is the right way to understand cash. But they're wrong.

Why? Even online, statements are out-of-date. What about money not yet paid in? What about payments not yet cleared? Now maybe you can remember all that. But can you always be certain you've the cash you think you have? That you've enough to buy that new gismo or pay that bill now? Or if you were to buy those things on a credit card, you could pay for them next month?

You see, bank statements aren't just wrong, they look backwards. They're just a snapshot of what cash moved where when. Not what cash is going to move where when.

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