CEOs, many of us are so focused on evaluating our profit and loss statements from month to month that we may be missing some other important numbers.  We continually ask ourselves that one critical question:  Are we a profitable business?  That’s a great question.  Analyzing your P & L on a month to month basis is an absolute must-do.  However, more times than not I find myself working with a client that is showing a net positive income on their profit and loss statement, but at the end of the month they have no cash.  There are many possible reasons for this.  One common mistake happens when a business owner forgets that the cash used to make long term debt payments does not show up on your P & L.

Here’s a tip:  Identify a cash flow analysis formula for your business.  For example, you might add up the cash in your checking and/or savings accounts, plus your accounts receivables, minus your accounts payables.  This formula will give you a very simple and basic calculation of your current liquidity.  It will give you the ability to evaluate whether or not you are generating enough cash to fund ongoing operating expenses.  If you begin to measure the true cash your business generates, you will respond to that measurement.

This has been your CEO Rule of the Week.  I am Ruben Estrada.  Your Next Move

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