The Principle of Cash-Basis Management

Modern accounting is based on "accrual accounting," where revenue and expenses are recognized when they are generated--not when money actually changes hands.

However, this method may not directly link the movement of profit and loss figures on financial statements with actual cash flow, making it challenging for managers to grasp the real state of operations. The foundation of business is ultimately the cash on hand. Managers shouldn't be merely satisfied with accounting profits; they should constantly think about "where is the money that was earned" and strive to increase cash on hand.

By diligently practicing cash-based management and maintaining ample funds, a business can be stabilized and prepared to seize new opportunities, enabling it to pursue new ventures from a position of strength.

Paraphrased from Kazuo Inamori's Management Philosophy Dalian Report Meeting (October 23, 2011)