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Difference between profit & cash

There’s a big difference between profit and cash. Lets make a plan to help with increasing your profit & cash

1. Sales.

Profit increases when you increase sales; cash increases when you collect the money from customers. 

To increase both your profit and cash from sales:

  • Have a point of difference with your customers so they refer you on
  • Generate more leads and referrals
  • Convert a higher number of quotes or proposals
  • Increase transaction value

2. Invoicing.

Profit increases when you send an invoice to a customer; cash increases when you collect the invoiced amount. 

To increase both your profit and cash:

  • Set clear Terms of Trade and stick to these
  • Agree the price in advance
  • Stick to your payment terms
  • Don’t do work for people who have been overdue before

3. Margins

Increasing your margins will increase your profit; collecting the increased margin will increase your cash. 

To increase both your profit and cash:

  • Increase your prices
  • Invoice faster
  • Negotiate better payment terms with suppliers
  • Reduce errors and rework
  • Train and empower your team

4. Financing.

Reduce your finance costs to increase your profit; borrow money for assets to increase your cash. 

To increase your profit and cash through financing:

  • Spread the costs of assets over 3-5 years instead of buying them outright (e.g. vehicles)
  • Borrow from a bank instead of a finance company
  • Secure the asset purchases over ‘bricks and mortar’ (if possible)

5. Overheads.

Reducing your overheads will increase both your profit and cash. 

To reduce your overheads:

  • Negotiate with suppliers
  • Measure your return on your spend (e.g. advertising, accounting fees, etc.)
  • Review your subscriptions
  • Go paperless - Check if suppliers charge for sending invoices and go paperless.

While all of these suggestions can help to increase your profit and cash, they are not the only options available. Every business is unique as are the drivers behind profit and cash. We can help you identify specific areas of improvement in your business to increase both profit and cash.

Please get in touch with Beyond Your Numbers, your team of Nelson Bookkeepers. We are more than happy have a confidential chat.