In my conversations with many business owners, I keep hearing them speak in terms of turnover.

They say, “Oh, last year I did five crores and the next year I want to go to seven crores, then eight crores and ten crores..” And I feel that’s great! But when I ask them if they have focused on their net profits, they say, “Ah, we are focused on the turnover; once we achieve the turnover, we are sure we’ll hit the profits!”

I have seen companies whose turnover is growing year after year, but then they are not growing really as a company. They are struggling, sometimes just to meet their own expenses, and their profits are always going down. Their debts are increasing and they don’t have the required net worth, and a number of issues start to crop up.

Then, there are companies with lots and lots of profit. They come to seek help from me (their chartered accountant) and say, “I am making profits, but I don’t know where my money is going.” So then I ask them if they are focusing on cashflows. To this, they say that they are not sure!

Please understand that the very purpose of your business is to bring more and more cash in. Yes, it’s good to focus on turnover; yes, it’s good to focus on profits too! But without the adequate cashflow, you are only going to choke your business and, eventually, it will be stuck in a place where it cannot move forward anymore.

Do you have adequate cashflow? When I say cashflow, I mean that it has its source in profits and not loans. Loans do not count as cashflow because the cash you use is from the outside to run your business. The more loan you take, the more it’s going to hurt you in the long run. It may even, sometimes, lead to the closure of your business.

That’s why, my advice is that you look at your business from a cashflow angle, even as you continue to plan and work towards improving your turnover and your profits. Very importantly, have proper policies and procedures in place for cash collections. Instead of focusing too much on your turnover, start to focus on your cashflows.

You cannot go back and change the past, but we can definitely look forward and start changing from today to ensure that we have surplus cashflow, week after week and quarter after quarter. Analyse your cashflow strategy on a quarterly basis and see if it is really working.

Turnover is vanity, profit is sanctity, but cashflow is reality. It’s now time to face reality, so let’s do a reality check – maybe once in a week or once in fifteen days or even monthly. That’s the way to make your business future-ready!