Cash is not profit and vice versa

Anna Stubbs • March 13, 2023

The purpose of a business is to make money, and that means you need to know the difference between profit and cash flow.

 

Net profit is what you have left after you deduct all your business expenses from all your revenue. You can improve net profit only by changing the things that affect revenue and expenses.

 

For example, if:

 

  • You renegotiate with your suppliers, you may get stock cheaper, or carry less inventory
  • Your staff engage with customers better, you can learn more about what they do and don’t like – and get more business
  • You can roster staff differently, you may be able to run your business more efficiently.

Cash flow comes from various sources. However, it also covers operating expenses, taxes, equipment purchases, repayments, distribution, and so on.

 

Note that a profitable business does not always have good cash flow. And a business with good cash flow is not always profitable. For example, you can have good cash flow, and loss-making expenses.

 

To work out how fast you can grow your business, look at your projected cash flow. We can advise you on this.

Keeping cash crowned as King

Your business can’t survive without cash.

The following six takeaways are essential for business success:

 

  1. Protect your cash position, by knowing what it is. Build a cash flow statement and always keep it up-to-date. If you foresee a shortfall, start at once to fix it.
  2. Create a cash buffer as an insurance against unexpected difficulties.
  3. Protect your cash position against revenue shocks, by maintaining a balance equivalent to at least two months of operating expenses.
  4. Be realistic with revenue expectations. Take action now if it looks like sales are not going to get you to breakeven.
  5. Credit checking up front will reduce the risk of customer non-payment. Make sure you follow up with clear payment terms agreed in writing. Communicate regularly with customers and automate where possible.
  6. Every pound you spend reduces cash reserves.


The best way to protect your cash is to create a budget for the spend you know you need, and stick to it.

Looking to improve cash flow? Make a time to talk to us. We're here to help.

The importance of having a business coach

By Anna Stubbs • October 6, 2025
It can be lonely at the top when you're running your own business. As the owner manager, the buck stops with you and that can result in all the pressures of financial management, people management, strategy and business performance ending on your shoulders.  To ease this pressure, it's helpful to have a business coach. A coach can look at your business objectively as an outsider, will act as a professional shoulder to lean on, and can help you to focus on and enhance your business ideas, strategy and longer-term tactics as an owner.

Do you need to improve the cash flow position for your business?

By Anna Stubbs • October 6, 2025
Keeping on top of the financial management of your business can be hard work. It's possible to have a profitable business that is struggling to find the cash flow to pay expenses and fund growth. Likewise, you could have positive cash flow but are not turning a profit, particularly if you are scaling. Turning a profit is at the heart of running any successful company But without an even and predictable flow of cash into the company, you can't cover your overheads, you can't pay your employees and you can't run your day-to-day operations – let alone think about expanding and growing the business. In the end, you need both. But if you’re going to be in control of your financial destiny, it’s important to get your head around the important process of cash flow management.

Can you build a viable one-person business?

By Anna Stubbs • October 6, 2025
A solopreneur running a complete and viable one-person business is no longer a pipedream. Sam Altman, the co-founder of Open AI, was recently quoted as saying that a one-person, billion-dollar business could be possible by 2026-2028, using tools like GPT-5 and the other generative AI tools that allow individuals to create and manage AI agents. The idea that one person, a solo CEO and entrepreneur, could generate that kind of capital on their own, would have seemed crazy less than a decade ago. But with the power of AI and the accessibility of flexible coding tools and AI agents, it’s actually a real possibility. Let’s look at how a one-person business could work, and how the basic business model differs from the traditional tech start-up model that we’ve known for so many decades.