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.

Start Up Loan Scheme: getting your business off the ground

By Anna Stubbs • January 29, 2026
Having adequate access to adequate funding is fundamental for any startup. In the early stages of getting your enterprise off the ground, you need working capital to reach the all-important minimum viable product (MVP) stage, rent premises and hire staff. But where does this initial funding come from? Let’s look at the UK Government's Start Up Loan scheme and the funding options it offers.

Cost-saving measures and how they drive profits

By Anna Stubbs • January 29, 2026
Question: “Can cost-saving measures in the business truly be a key driver of profits?” Running a profitable business is one of your key goals as an owner. Without profits, there’s no capital to reinvest in the business, no funds to grow the company and no money for your own dividend payment at the end of the financial year. So, is cost-saving the answer in these challenging economic times? Answer: “Careful management of costs is a fundamental way to improve your profit margins and profitability as an enterprise” Cost-saving measures will have a direct and measurable impact on your profits. This is usually achieved via two main mechanisms. Firstly, reducing your variable costs (like raw materials or direct labour) increases your gross profit margin. This retains more revenue from each sale you make as a business. Secondly, lowering fixed overheads (such as rent or software licenses) directly reduces the total expenses on your profit and loss statement, leading to a higher net profit. This immediate bottom-line improvement makes you a more financially healthy prospect to investors and lenders – which, in turn, can often make it easier to access funding and grow the business. Want to know more about cost-saving measures?  Talk to the team about your profit goals and we’ll advise you on the key ways you can reduce your overheads and expenses to drive improved profits.

Protecting you and your business: taking out insurance

By Anna Stubbs • January 29, 2026
We all hope that our pathway along the business journey will be smooth and uncomplicated. But the reality is that accidents can happen, along with unplanned injuries, damaging weather events and legal suits from disgruntled clients. So, what can you do to protect your business from these potential negative consequences? The answer is to take out the relevant business insurance for your company.