Profit against cash

The distinction that sinks businesses.

Why they differ

Sales on credit create profit without cash. Buying stock consumes cash without cost until it sells. Growth in particular eats cash even while profit rises.

Working capital is the money tied up in stock and unpaid invoices.
Most failures are cash failures, not profit failures.

Watching it

A cash flow forecast, however rough, is the single most useful document a small business keeps. Profit tells you whether the model works; cash tells you whether you survive to prove it.