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 Man on the Moon Principle

By Anna Stubbs • October 22, 2025
In 1961, President John F Kennedy famously announced his goal of landing a man on the moon and returning him safely to Earth before the decade was out. As we know, in July 1969, Neil Armstrong and Buzz Aldrin became the first people to walk on the moon, and were brought back to Earth safely, achieving JFK’s goal.  At a time when most people hadn’t even been on an aeroplane, landing on the moon would’ve felt unachievable and overwhelming. However, such a massive goal united people with a purpose; the story goes that even a cleaner mopping the floor at the space station said his job was to help put a man on the moon. So, how did they make the goal achievable? They broke it down into milestones, with each one taking them closer and closer to achieving their ultimate goal. The first milestone was to achieve lift off. So, they set about resolving this challenge. The next milestone was to reach orbit, so they had a team working on this milestone. Then, they had to reach the moon’s atmosphere, land safely on the moon, take off from the moon, enter Earth’s atmosphere and land safely back down to Earth. You can see how breaking the goal down into milestones gave everyone a more achievable objective to focus on which was less overwhelming. Those milestones were then broken down into the actions which needed to be completed. Each action was essentially a small step towards reaching the ultimate goal.

5 signs you’re undercharging

By Anna Stubbs • October 22, 2025
Are you undercharging for your services? It can be hard to tell, particularly if you’re in a niche industry or you’re a contractor. Costs have been rising, so it may be time to rethink your own pricing.

Understanding your revenue drivers

By Anna Stubbs • October 22, 2025
For your business to make money, you need to generate revenue. You produce revenue through your usual business activity, by making sales, getting your invoices paid, or taking cash from paying customers. So, the better you are at selling your products/services and bringing money into the business, the higher your revenue levels will be. But what actually drives these revenue levels? And how do you get in control of these drivers?