The GL Finance Corner: Cash Flow (Part 1)

Cash is King, everything else is Queen!

Revenue is great and all… but when we say cash, we truly mean cashflow — the main driver behind your business’ success.

So, why is it that cash flow is so hard to understand?

Accounting systems across the board are built around GAAP; formally known as Generally Accepted Accounting Principles. GAAP accounting is a great standard especially when comparing one company to another, such as for the purpose of financial or operational benchmarking.

However, the important thing for a business owner and their management team to focus on is generating real, physical, cash. Cash is used to fund operations (working capital), capital expenditures, and distributions to shareholders and owners (dividends)… just to name a few.

Keep in mind… profits do not lead directly to cash.

Next week we will explore some tools that we use to identify the drivers of cash.