January 15

Difference Between Cash Flow and Profit



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Difference Between Cash Flow and Profit

How are sales in your business? Are you making profits but still you do not have enough money in your bank accounts?

If you do not have enough cash to foot your bills, there is a possibility that your customers aren’t paying their invoices promptly. This can result in a cash flow shortage. It doesn’t necessarily mean your customers are delaying their payment, but that the timing of your payment terms and when they pay up their invoices aren’t lining up with when you need cash.

Using accrual-based accounting it’s possible to discover you made a profit but you still lack the cash you need for sustainable growth in your business. You must note that profit is determined by your revenue and expenses within a period of time. If you make more money and spend less on expenses then you have made a profit.

Cash flow is prone to change and it depends on when customers pay up their invoices. Your bookkeeping setup, sales on credit make up your revenue even if those customers haven’t paid yet. Through this, you may have a profit, but cash wouldn’t available.

The difference between profit and cash flow can have a major influence on any small business owner.  My Funding Team can make funds you need accessible to you.

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