• Cash is the universal business language; profit is a language of accountants; most people understand cash but few really understand the profit;
• Profit can’t be spent, only cash can;
• A profit is not a profit till it’s cash in the bank;
• Profit can tell lies; cash does not;
Cash Flow Tells the Real Story.
Who will ever forget the HIH saga a few years ago; a company collapse involving, fraud, deception and massive losses for policy holders and investors? The really interesting thing about HIH was that in the two years before it collapsed the combined net profit was $164 million; but the operating cash flow showed a deficit in excess of $1 billion! The exact same thing happened to One-Tel, FAI and Harris Scarfe; they all bled to death; proving once again that profit is often a useless figure but cash flow tells the real story.
If your bookkeeper or accountant can't help you understand cashflow, perhaps it time to consider a change...