Cash Flow vs Profit – What’s the Difference (and Why It Matters)
You can be profitable on paper and still run out of cash. Here’s the plain-English breakdown.
Profit (P&L) in one minute
Profit = Sales − Costs. It’s measured over a period. It excludes VAT, loan repayments, and timing issues.
Cash flow in one minute
Cash flow is actual money moving in/out of your bank. It includes VAT payments, loan repayments, stock purchases, and late invoices.
Common traps
- Growing broke: sales up, cash down (stock, staffing, VAT).
- Slow payers: profit exists, but receivables starve the bank.
- Seasonality: quiet months hit cash, even if yearly profit is fine.
A simple weekly routine
- Update a 13-week cash forecast.
- Chase aged debtors every Tuesday.
- Delay non-critical spend if the next 6 weeks look tight.
- Invoice faster (on delivery, deposits up front).
- Keep a buffer (1–2 months fixed costs).
Tool stack (budget-friendly)
- Spreadsheet or Google Sheets
- Accounting (Xero/QuickBooks) + simple debtor report
- Payment links for faster collections
H2: Final thoughts
Watch cash weekly, profit monthly—and you’ll sleep better.
👉 Want help setting up a cash forecast you’ll actually use? Contact us.
