A short business monologue emphasizing that accounting profit (P&L) can be misleading and that cash is the true indicator of a company’s ability to distribute value. The speaker urges tracking "distributable cash"—the cash at month-end above required savings and operating needs—and recommends using that figure (not paper profit or revenue) to determine bonuses and profit-sharing.
How much cash do you have available for distribution? Now this is important because most companies track their profit. Specifically, they're going to track their profit on a P and L. The problem is that P and LS can lie, right? As you probably know, it's very easy to have a P and L profit but no cash. And I've seen this happen with a lot of our clients where they're technically on paper profitable, but they're completely out of cash. So we've got a saying here, P and LS lie, cash doesn't. And so we started tracking how much extra cash do we have at the end of every month over and above what we need to keep in savings and operating that's available for distribution. Now, more importantly, we based bonuses and profit sharing on this distributable cash figure, not P and L profit, not paper profit, and definitely not revenue. But how much cash was actually distributed.
