Cash flow is the lifeblood of any business. The goal of all business owners should be to have more cash coming in than going out. Cash is used to fund payroll, cover overheads, pay suppliers and purchase equipment. What it really boils down to is that without a healthy cash flow, a business wonâ€™t survive.
Profitâ€™s whatâ€™s left over after all expenses have been paid, and itâ€™s what your is calculated on. It might seem odd, but there have been businesses that have gone under while still reporting a profit, and thatâ€™s because their cash flow was inadequate. So while itâ€™s important to focus on generating a healthy profit, the fact is that itâ€™s cash flow that keeps your business running.
Sometimes small business owners need a hand coming to grips with this, which is understandable. After all, they’re in business to make money. But cash is king – without it a business canâ€™t grow, secure financing or attract investors. This is because a cash flow statement is an actual report of what a business has available, whereas profit might show up on paper, but doesnâ€™t reflect how much cash is actually in the business to help it grow.
A healthy cash flow also means a business is protected if the owner is facing problems repaying a loan or if their sales arenâ€™t what theyâ€™d hoped for.
The below article looks at this in more detail, and would be useful to share with your small business customers.
Why cash flow can be more important than profit – accountantsdaily