Profit is Not Cash

Many profitable businesses fail because they run out of cash. Understanding the difference between a P&L (Profit & Loss) and a Cash Flow Statement is critical.

Cash Flow Drivers

  • Accounts Receivable (AR): How fast are your customers paying you?
  • Accounts Payable (AP): How fast are you paying your vendors?
  • Inventory: Cash tied up in unsold goods.

Tips for Better Cash Flow

  1. Invoice immediately: Don't wait until the end of the month.
  2. Offer early payment discounts: E.g., 2/10 Net 30.
  3. Negotiate terms: Ask vendors for Net 60 or Net 90 terms to keep cash in the bank longer.

Keep a rolling 13-week cash flow forecast to predict shortages before they happen.