Why Profit And Cash Are Not The Same Thing - And Why It Matters.

You’ve just reviewed your quarterly accounts, and the numbers say your business has made a profit – fantastic!

But why does your bank balance feel so underwhelming?

This is a common frustration for business owners. The truth is: profit and cash are not the same thing. Confusing the two can lead to poor decisions, stress, or even running out of money.

Profit is your income minus your expenses - how much your business has “made” - but that’s only on paper. It reflects your performance over a month, a quarter, or a year.

The problem? Profit doesn’t tell you whether the £10k invoice you sent to Joe Bloggs at the end of May has been paid.

And it certainly won’t tell you whether you’ll make a profit next month, next quarter, or even next year.

Cash, on the other hand, is about what’s come in and what’s gone out - physically.

You can’t pay your employees or your suppliers with profit. You need real cash in the bank to do that. Your bank gives you a ‘live’ snapshot of your finances, but it won’t tell you if you’ve set enough aside for your next pesky VAT bill, or whether Joe Bloggs plans to settle his invoice this month… or next quarter.

Here’s the trick: profit and cash are two different languages. They each tell part of the story – but not the whole story. Think of them are a duo if it helps: Laurel & Hardy? Thelma & Louise? Ant & Dec? Once you treat them as a duo you can start looking ahead, taking control of your own business story - which is much more exciting!

Strategy and forecasting aren’t just for big businesses.

Putting these in place – no matter your business size – makes business easier, less stressful, and more profitable.