August 30, 2017

Understanding the Difference Between Cash Positivity and Profitability

Have you ever the wondered the difference between cash positivity and profitability? Understanding the difference is very important for the running of a business. A financial accountant from The Kelvin Partnership will be able to help you at the end of the year with the explain your business profits.

Working together, our experienced team will advise you on the best steps to take to be cash positive. The success of your business relies on understanding this difference. A Glasgow accountant will ensure that your financial needs are met, in an organised and thorough way.

What is cash positivity?

Simply, cash positive means your cash inflows exceed your outflows. Cash flow means the actual working capital your company has on any given day. Money used to cover business costs – rent, payroll, expenses etc.

It is possible to become cash positive without the help of a financial accountant, however there is a difference between cash positivity and cash coming in just on time, barely seeing your account before being paid out again. With our help, we will make sure that your company is stable and successful, and you are not just working to keep yourself afloat.

What is profitability?

An accountant for new business needs make sure your company is valued properly

Profit is the amount that exists on paper. A basic measurement of how much money comes in and out of your business monthly. For a company to be profitable, there needs to be more money coming in than going out. However, just because you have more incomings than outgoings, doesn’t mean that your making profit. It is possible for your company to be profitable without being cash positive.

What’s the difference?

The difference comes down to timing. For example, if you send out an invoice for £2,000, that amount will be recorded as a profit for the company, even if the actual payment does not come for a while. Then, your bills are due and you are unable to pay them because that £2,000 has not come through. This would make your company cash negative, even though that £2,000 is a profit. It is crucial for business success that your cash flow is positive so that these situations do not arise.

With help from our accounting team, your business will be able to turned around. Generating cash instead of merely breaking even! It just takes a bit of planning.

How does your business become cash positive?

money piles No matter if you are selling or expanding, growth in business is vital!

Strategic Planning – Getting your business to a cash positive stage does not happen instantly, patience and planning is key. Using our strategic planning service, we will work with you to get there, with the necessary steps!

Do Research – Look at others doing well in your industry. Gauge what they are doing, how are they generating regular cash? With an insight into industry success, you can see how your company can improve!

Financial Accountant – Hiring a new accountant, your company will be influenced by a fresh perspective. As well having help from a very experienced and highly qualified accountant, the team at TKP can help you with any other financial worries you may have. In no time your company will profitable and cash positive!

Financial Accountant from The Kelvin Partnership

Here at The Kelvin Partnership we want to make sure our clients are up to date with the latest financial advice. To learn more about tax investigations, look at our last post!

Does your company need help to become cash positive? Or do you have any other business worries? Get in touch with our financial accountant team!