In business, few numbers get as much attention as profit. But what if I told you that being profitable doesn’t guarantee survival? It’s not a lack of profit that sinks most businesses—it’s a lack of cash.
Enter: cash flow.
Cash flow is the heartbeat of your business. It’s the money coming in and going out. And unlike profit, which can look great on paper, cash flow tells you if you can pay your team, cover your bills, or survive a slow month.
Here’s why entrepreneurs need to stop obsessing over profit and start managing cash like a hawk.
1. Profit Is an Idea. Cash Is Real.
You can show a profit on your income statement but still be broke. Maybe a big client hasn’t paid their invoice yet. Maybe inventory costs hit hard this quarter. Cash is what keeps the lights on.
2. Growth Eats Cash
Ironically, rapid growth can kill a business if cash flow isn’t managed. More customers mean more expenses upfront—before those customers pay. Hiring, fulfillment, marketing—all need cash now.
3. Forecasting = Survival
You need a cash flow forecast like you need a GPS on a road trip. Know when dips are coming. Plan for them. Map out your burn rate. Know your runway. If you’re raising capital, your cash flow forecast is your most important document.
4. Watch Your Collections
Slow-paying clients? They’re hurting your business more than you think. Establish clear payment terms, automate reminders, and don’t be afraid to follow up. Consider offering early payment discounts or using invoice factoring if necessary.
5. Build a Buffer
Aim to have 3-6 months of operating expenses saved. This is your safety net when the unexpected hits—and it will hit.
TL;DR: Profit is vanity. Cash flow is sanity.
You don’t go out of business from being unprofitable for a month. You go out of business when you can’t make payroll.
If you want to stay in the game, manage your cash like your future depends on it—because it does.