/ Cash or Profit?

Knowledge Base Article
Article Type: Blog
Author: Bibi M

Cash or profit?

cash or profit

There is a tendency for you to expect that if you are profitable you will be automatically cash rich. But it does not work that way. This is because cash is a result of your profit, but also a result of your working capital, as well as your other assets. We have written a book about this already – How to double your cash flow overnight.

In this blog we will highlight how cash differs from profit and what is more important to your business. This will set the foundation of your understanding for the importance of cash flow to your business. The greater your understanding, the smarter the actions for doubling your cash flow.

Think about the movies when they are trying to find a criminal who is on the run. What’s the first thing they do? They try to understand as much as they can about the bad guy. So think of your cash flow as the bad guy, you want to succeed in getting it!

What is the difference between cash and profit?

Profit is your leading indicator, and cash flow is your lagging indicator. Cash flow happens after your profit and sometimes it does not happen at all. You also need to use cash before you generate profits.

What is more important, cash or profit?

If you are growing business, cash is more valuable to you – you need cash to fuel your growth. That’s why so many growing companies are breaking even, or even making losses, but concentrate on generating more cash. Amazon, for example, has a business model that produces significant amounts of cash despite breaking even, so it can continue to expand rapidly.

Cash issues grow as you scale up your business. Understanding the importance of cash will help you determine what business model is suitable for achieving your business goals. Understanding cash will also help you uncover blind spots in your business masked by your growing profitability.  You might be outgrowing your ability to fund your business because you did not understand the importance of cash. Find out if your cash flow is inadequate with our Cash flow Performance Tool for CEOs of growing businesses. If you are in such situation, you will continue to raise emotional money to fund downward spiraling growth and money people will always take advantage of you.

It is important to understand your business from the perspective of financial experts and investors, otherwise you will always be frustrated with their lack of understanding of your business. They are interested in your creditworthiness and this is their motivation for entering into a dialogue with you in the first place. They are looking for a return on their money.


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Read more about BMIM Cash flow

How we measure the success of your Strategy (WITH FREE TOOL)

How to fix your Working Capital problem…even if you are not “numbers person”?

Understanding your profitability picture (with FREE worksheet)

Is your cash flow inadequate?

Turnover is vanity, Profit is sanity – but Cash flow is reality!

Solving Cash flow Concerns

How to generate cash to self-finance your business?

Life-Cycle Financing of your Entrepreneurial Company

Early stage business financing: The pros and cons of taking money from Business Angels

Case Study: Growing broke with inadequate cash flow

Case Study: Financial turnaround and re-invention

Case Study: Restructuring for Survival and Financial Turnaround

Case Study: Subscription Finance: Accelerating business growth by building and maintaining long-term customer relationships

Why your financial goals don’t seem to get completed? (and how to go about it)
Finding “True North”: How to tell if an opportunity is pulling you in the direction of more money?
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How to stay open to all possibilities for making more money in your business?
Solution focused
How to stay solution-focused when you are losing money?
financial goals
Identifying “True North”: How to define your financial goals with certainty?
How to find cash to cover your shortage?
Top 5 business money habits to free yourself from financial worries
How to re-write the financial future of your business?
Why are the BMIM Cash Flow tools the Google Analytics for cash, profit and business value
How to tell if someone is ‘making’ you or ‘losing’ you money in your business?

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