@accounting.knowle8: Profit Explains Yesterday. Cash Flow Funds Tomorrow. Many business owners celebrate profit but ignore cash flow and that's one of the biggest reasons businesses fail. Profit tells you how well your business performed over a specific period. It is calculated by subtracting expenses from revenue. A profitable business appears successful on paper, but profit does not always mean cash is available. Cash Flow shows the actual movement of money into and out of your business. It tells you whether you have enough cash to pay salaries, suppliers, rent, taxes, and other daily expenses. Why Profit and Cash Flow Are Different Profit = Revenue − Expenses Cash Flow = Cash Received − Cash Paid A company can report a profit but still run out of cash if:Customers haven't paid their invoices. Too much cash is tied up in inventory. Loan repayments are due. Large equipment purchases reduce available cash. Simple Example Income StatementSales: $100,000 Expenses: $70,000 Net Profit: $30,000 Looks great!But... Cash FlowCash collected from customers: $40,000 Cash paid to suppliers and staff: $50,000 Net Cash Flow: -$10,000 Although the business made a $30,000 profit, it actually lost $10,000 in cash during the period. Key Difference Profit tells you:How much you earned Whether your business is profitable Your financial performance Cash Flow tells you:Whether you can pay today's bills Whether your business can survive Whether you can invest and grow Golden Rule Profit explains yesterday's performance. Cash flow determines tomorrow's survival. A business can survive without profit for a short time by raising cash but it cannot survive for long without cash, even if it is profitable. Remember: Profit measures success. Cash flow keeps the business alive.

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Saturday 01 August 2026 18:40:21 GMT