We sometimes get the question, “What’s the difference between cash flow and profit?” I have even had the statement: “I can’t be profitable because there’s no money in my bank.”
So, what is the difference between cash flow and profit in simple terms?
Profit is what is left over after you earn your income and pay your expenses. Cash flow, on the other hand, is the movement of money in and out of the business.
So, profit is looking at the products you sell, the cost of goods for making those products, and your overhead and expenses, and the leftover amount is your profit.
Cash flow could have money coming in from loans, accounts receivable, or sales, and your payments out could be reducing liabilities, purchasing fixed assets or other such expenses.
So, as you can see, cash flow and profit are two totally different things, yet they do work together.
We at Affordable Bookkeeping and Payroll are growth and profitability advisors. If you need help in this area, we can help you! Give us a call at (310) 534-5577, or [email protected]. We’ll set up a discovery call to learn more about you and your business and see if the services we offer are right for you.
