Running a business · 1 min · 18 June 2025
Cash flow vs profit: a simple breakdown that actually makes sense
Profit is a story about the year. Cash is whether Friday’s wages clear. You need both numbers on the same page.
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You can be profitable and broke. You can be cash-rich and losing money. Both happen every month in Lancashire, usually in businesses that only look at the bank app.
Profit is timing plus judgement
Profit asks: did this year earn more than it cost, using accounting rules? Invoices you have not collected still count. Stock you have not sold does not. A van is not an expense in one go. That is why profit and the bank disagree.
Cash is rude and useful
Cash asks: can you pay the people and the tax when they are due? VAT, PAYE and a supplier on the same Friday have ended more ‘profitable’ companies than a bad product.
What we put on one page
Profit for the month, cash in the bank, and tax coming in the next 90 days. If you only have room for three numbers, those are the three.
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This article is general information, not personal tax advice. Talk to us before you act on it.