Let me show you the difference between profits and cash with a simple example. Take the estimates we have in the previous sections for the sales, direct costs, and operating expenses of Garrett’s bicycle shop. Put them together and you have the illustration here below as projected operating income (remember that income and profit are the same… Read More »
Your business might not have the factors that make cash flow so different from profits. Maybe managing sales and expenses is enough for your business. Here’s how to tell whether or not you need to calculate cash flow: If you scored less than one, heave a sigh of relief and watch your sales, cost of sales,… Read More »
True cash-only businesses are extremely rare. Such a business would not have to sell entirely in cash, check, or credit card; not ever have to buy inventory or anything else before it makes a sale, and would pay for everything it buys immediately. Maybe that’s a crafts-market artisan? A writer? I’m not sure; but I am sure that most of us, as business owners, have to deal with these essential principles of cash flow.