A big fat lol to thatMr Magic wrote:Normally, the bigger the profit the better the cashflow.oh when wrote:A good cash flow is more important than a huge profit.
Depends what you call 'continually'. I could get your business to make a loss for years and still be a going concern.Mr Magic wrote:[If you are continually making losses then the cashflow will dry up.
Profits have nothing at all to do with cash flow. Profit is an Accounting concept thats all.Mr Magic wrote:[Eventually you just run out of available money to use to pay the bills.
Enron had massive profits all powered by mark to market profit recording and dodgey off book liability accounting.
Sort of. However you can make ten mill in profit but be up sit creek if you dont collect it.Mr Magic wrote:[In theory, if you don't make a profit then you are relying on your ability to collect all monies to use to pay the bills - it doesn't work too well in the real world (ie in actuality and not theory). Invariably you run out of available cash to use, which is when your suppliers (players included) realize that you have 'problems'.
This is why the cowboys fcuk up in business. They think Sales equates to money in the bank.
Mate, I worked from a non profit org for years that effectively budgeted for a zero profit, and it had 30 mill in the bank.Mr Magic wrote:[It would be absolute folly to budget on 'breaking even' as the slightest hiccup in your projections will see you plummet into a loss, and thereby put strain on your cashflow.
Budgets are only fortune telling, and to make the board feel better. You go off and forecast twice or three times a year, pear back come in ahead of budget and get your yearly bonus.
Do you think us accountants make money just from Salary.
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