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MIBAR.net

Should Profit Margins or Cash-Flow Drive Business Decisions?


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The above question may be an age-old debate that never gets solved, but most companies reach a point when they must decide to focus more on one or the other. Profit margins refer to the percentage of revenue that is net profit, ultimately telling a company how profitable it is. Cash flow refers to the movement of cash to and from a business and can reveal information about a company’s actual available cash at a given time.

 This question was recently presented to LinkedIn users on the CFO Network prompting several insightful responses. One user said that companies should always focus on both: profitability and having cash on-hand to make sure liquidity is not an issue. Similarly, another user pointed out that the two are intrinsically linked. If profit margins start to slip, he explained, “it will affect cash flow sooner or later”.

Other users leaned more toward cash flow stating that a company can struggle with profitability but will sink without cash to make deals and eventually become profitable. However, even those who thought cash flow was more of an immediate concern still believed that lack of profitability would eventually catch up to a business and result in diminished cash flow.

Above all, the group seemed to come to a consensus regarding the necessity to monitor both metrics closely. This is where a good ERP system comes in handy. Microsoft Dynamics ERP solutions offer customizable reporting and Business Intelligence (BI) tools that can uncover intricate details about your company’s operations, helping you maximize cash flow and plan for better long-term profitability.

For a closer look at the BI functionality offered by Microsoft Dynamics GP, speak to one of MIBAR.net’s award winning GP consultants - our team can show you how to turn those reams of data into actionable insights.

By MIBAR.net, Microsoft Dynamics ERP Partner serving Long Island and New York Metro specifically within the Manufacturing, Distribution, Consumer Packaged Goods, Food and Beverage, Retail and eCommerce industries.

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