difference between ‘cash receipt’ and ‘income’Cash is the currency that is always in exchange in the corporate world, whether legally or illegally, it is always on the move. The receipt of cash from a company is the action in which a company receives a certain amount of money to invest, buy or sell from another, this action is always carried out by a third party, be it a company or shareholder.
Income is all the profits that a company owns , these profits are added and they give a total, those are the profits. In other words, income is those gains that can be monetary and not monetary, but that ultimately are beneficial to the owner, partners or shareholders of the company.
Differences in cash receipt and income
In a business or company you need profits to grow , likewise it is necessary to receive and handle cash well to survive day by day.
These seem very similar concepts, but these are really only related but are not the same. We can give two strong differences:
- If the payments of a company are long-term payments, you can make a formula regarding the profits of the same, however you can run the risk of not receiving cash , so it will take you a day cash by day and your business would soon fail.
- If we get a bank loan to be able to receive cash and be able to mobilize cash, this would cause a long-term consequence since if no profit is made, you may have to pay that loan with money from your pocket.
Which is more important?
If what you are looking for a long-term company both are equally important , but, if what you are looking for is a short-term company, one could become more important than the other.
If you are starting in the world of entrepreneurs, your priority is managing cash , therefore receiving cash, since you need to be buying equipment, investing, spending, when you start creating a company is that you will have the most expenses influential, so you need to have cash as a priority since what you need is the proper functioning of your company.
If your business is already made up of fairly solid foundations , since you can already determine stable expenses, you can even go from making risky investments and simply being comfortably with your company.
By having less movement and surprises, you will be able to plan better and you will be able to achieve the established objectives without haste. You will have a much better idea of determining when cash is needed. So this will be a better long-term option for your company.
What is sought is that these two aspects are in total peace and harmony, that is the point that the company seeks, since if sales bring and control the receipt of cash, those sales must make long-term profits.
In other words, your company needs cash to work and bring higher profits each time, and the larger the profits, the more cash they will bring. In both we must take into account the dividends of the company .
To reach the optimal state of a company in which both points discussed above are in balance, the financial state of the company must be known, then a calculation must be made to be able to accurately determine the receipt of cash and the earnings of the company. Subsequently, this calculation must be raised in a business strategy .
And to finalize the income are those who manage the costs and profits of a company in the future, the receipt of money is who controls them in the short term. Both are of the utmost importance for a company and we already talked about what would happen if there is more importance than the other in a company.
