Have you heard the expression “Revenue is vanity, profit is sanity, but cash is king”.
It’s a phrase used a lot in the accounting world and one that holds true almost all of the time. If you don’t manage your cash you will not have a business. “6 figure” sums are always talking about revenue and are amazing but you have no idea if they have 6 figure costs at all or are turning a profit. You also have to run the business you have, not the one you want, to ensure your costs don’t run away with you.
You must also be careful not to manage just your actual bank balance all of the time, as this includes amounts due for tax, payroll, supplier payments. It also does not account for invoices that your customers have not paid you for yet.
Managing your business on a cash basis for day-to-day practical management of your business numbers is a perfectly good way to do things. However, you must always make...