There are two bottom lines that really matter to me as a business person.
1) The net profit and
2) cash or liquidity position

Of course, for us who are accountants, the terms look and seem obvious. But what are we talking about-: See, The Net profit is what is left after you remove all the expenses from your sales. Whereas Cash or liquidity, for our purpose, is the cash or near cash you have at your disposal at any one time.

Interestingly, you could be on very high profitability but no liquidity.  You could also be on low profitability but be at a proportionately higher cash position. The best place to be is when you learn to balance the two and keep them at optimal positions. This you do by, for example-:

1) Increasing your sales
Never allow yourself to lose an opportunity to make a sale. Invest in people and things that bring sales. Make sure your prices are right, the customer is happy etc.

2) Reduce expenses as much as possible
Again here we are talking of a balance. Simple things like… switching off lights that you don’t need. Avoiding unnecessary travel and entertainment, Looking for great discounts for your goods, etc. All those little things will impact the profit you make at end of the day. Secondly, once you make money do you having a strong saving culture.

How do you invest the money you make? Which assets do you invest in? Cars or shares for example. The action and the attitude you have towards money will greatly determine your liquidity. Ever remember liquidity or lack thereof determines the survival of a business much more than profitability. It’s unfortunate that many of us – SME’s – don’t appreciate this.

As we prepare to bounce back into our businesses, let’s take a minute and chart our way forward on these two matters. Matters net profit and matters liquidity is my challenge to you today. Share with me your views. See you at the mountain top.