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Profit or loss? Being able to tell is the real capital

Ask anyone who runs a business whether they made a profit or a loss last month. Most of the time the answer comes after a long sigh: “I think there was a profit,” or “not much of a loss.” That phrase, “I think,” is the biggest risk in many businesses.

The numbers make it even clearer. A small business in Bangladesh produces an average annual output of only about 9,500 dollars, while in neighboring Vietnam the figure is more than 225,000 dollars. The difference is not only about capital or markets, it is largely about information. A business that knows exactly where its money goes and where it comes from can make decisions quickly and correctly.

A widely discussed study by a US bank says that about 82 percent of small businesses that shut down failed because of poor understanding or mismanagement of cash flow. Not because the business was running at a loss, but because it was not clear when and how much money would be in hand. Profit may exist on paper, but without cash in hand, that profit has no real value.

The risk is no smaller in Bangladesh. More than half of the country’s small and medium enterprises still operate in an informal structure, where the practice of regular bookkeeping is comparatively low. As a result, decisions are often made on assumptions before the real state of the business is understood.

Profit or loss: being able to answer that question instantly is the real strength of a business today. When sales, expenses and dues are all organized in one place, decisions are made on the basis of data, not assumptions. This is exactly the clarity Niqesh wants to give every business, every day.