Cash Flow · 6 min read
Cash Flow vs Profit Explained
Profit is an opinion. Cash is a fact. Most failed businesses were technically profitable in their last quarter — they just couldn't pay the bills.
Why profit and cash diverge
- Accounts receivable: revenue recognized, cash not yet collected
- Inventory: cash out, expense recognized only when sold
- Loan principal: cash out, never hits the P&L
- Owner draws: cash out, not an expense
- Depreciation: expense, no cash impact
A weekly cash routine
- Update a 13-week rolling cash forecast
- Review AR aging and collect what is past due
- Confirm payroll and tax payment timing
- Match planned vs. actual cash from last week
