𝗣𝗿𝗼𝗳𝗶𝘁 𝘃𝘀 𝗖𝗮𝘀𝗵𝗳𝗹𝗼𝘄: 𝗧𝗵𝗲𝘆 𝗔𝗿𝗲 𝗡𝗼𝘁 𝘁𝗵𝗲 𝗦𝗮𝗺𝗲 𝗧𝗵𝗶𝗻𝗴

Did you know a business can be profitable and still run out of cash? It happens more often than you'd think, and it comes down to the difference between profit and cashflow.

𝗣𝗿𝗼𝗳𝗶𝘁
What remains after you subtract your expenses from your revenue. It lives on your profit and loss report and tells you whether your business is making money, but not whether that money is actually in your bank account right now.

𝗖𝗮𝘀𝗵𝗳𝗹𝗼𝘄
The actual movement of money in and out of your bank account, when it arrives and when it leaves. It's what keeps the bills paid day to day.

𝗪𝗵𝘆 𝗱𝗼 𝘁𝗵𝗲𝘆 𝗱𝗶𝗳𝗳𝗲𝗿?
One example is owner drawings. When you take money out of the business for personal use, your bank balance goes down, but it's not recorded as an expense on your Profit & Loss report. Your business can still show a healthy profit while the cash available in the bank has been reduced.

𝗪𝗵𝘆 𝗱𝗼𝗲𝘀 𝗶𝘁 𝗺𝗮𝘁𝘁𝗲𝗿?
A business that only watches its profit can be caught off guard by a cashflow problem, like not being able to pay suppliers, meet payroll, or cover everyday expenses. Knowing both figures and understanding the gap between them gives you a much clearer picture of where your business actually stands.
If your books are up to date, both numbers are sitting right there in Xero.