Management’s actions either result in surplus cash at the end of a transaction, a day, a week, a month, and a year or it doesn’t. It’s this black and white.
The core role of management is to ensure that less money is being spent to convert a sale into profits than it costs to produce those sales. Do this consistently, and a business will have a cash surplus. Allow costs to consume sales you have a management failure that results in cash deficits.
Business management is ultimately this simple—you realize a profit as a result of cash remaining after total costs are deducted from a sale, or you don’t.
The key to being a great business manager is proactively managing your sources and uses of money at a profit. You know you are doing this when you aren’t worried about cash outflows exceeding cash inflows.
At its core, profitable business management comes down to being more proactive and less reactive in managing the cash flowing through your business. Following the flow of money through your business tells you when and where management action is needed to ensure your operations are making and holding onto the money they should be.