Cash flow is the difference between actual cash received and actual cash spent in the process of doing business - pretty simple right? Money in and money out! This is an important metric because it is a very real indicator of how your business is performing - ie can you pay your bills tomorrow, next week or next month?

Profit, on the other hand, is revenue from the sale of your services and products (whether you have received the money for them or not) minus all of your expenses (whether you have paid for them or not). This likely impacts you if you extend credit terms to your customers or you have a trade account with your suppliers. The measure of profit is an important one to know whether you are making more than you're spending.

To put it simply - profit is recorded when the sale is made and cash flow is recorded when the dolla bills hit your bank! On paper you can be seen to be making a profit but scratching your head as to why you don't seem to have a dime to your name!

So what can you do? Here's just a few ideas...

If you extend credit to your customers, make sure you invoice straight away & send statements, try to collect payment sooner, give them more ways to pay you - make it easy for them! Consider taking deposits on large or custom orders so you're not left out of pocket trying to fill the order.

If you can pay your suppliers slower, do it, but be mindful not to damage your biz relationship or incur late fees. Try negotiating longer trade terms so you can give yourself more time to get paid by your customers. Close that cash flow gap!

Most importantly, set up a cash flow forecast for your business so you can keep tabs on money coming in and money going out!

Photo by Siora Photography on Unsplash