The Difference Between Cash Flow and Profit

Peaceful dreamland is an elusive place when you are a business owner.

It does not matter whether you run a $500K or $500M business; worries can still keep you up at night.

What is the most common thing standing between business owners and sleep?

Cash. Or, rather, not knowing if there is enough cash.

You have heard our mantra: Cash is king. And prince. And princess. And duke. And duchess.

But is it just about having a boatload of extra cash sitting around, or being in the black at the end of the year?

Not at all. Too many business owners conflate cash with profit.

But more businesses fail because of a lack of cash than because a lack of profits. Cash flow is not profits; it’s all a question of timing.

Profitability Vs. Health

You can be wildly profitable, but if you do not have enough cash in your accounts when your big accounts payables are due, you are going to have to start pulling from places you don’t want to pull from, or risking your vendor relationships, which can impact inventory and service levels, which is a recipe for disaster.

Profitability is important, but the health of a business depends on a healthy cash flow. Believe us.

Cash flow must be properly understood and managed. Stay tuned for more information on making cash flow work for your business in the next posts. (Or you can always speed up the learning process with a phone call to us;)

Wouldn’t it be nice to sleep well at night, knowing that your cash is flowing like a lovely green river? We are here to provide you with peace of mind. Call us today: 612-816-6007