Cash Flow vs. Profit: Know The Difference

For many business owners, cash flow and profit sound like the same thing. But in reality, they’re very different-and understanding the difference is critical for business success.

What is Profit?

Profit is what’s left after deducting expenses from revenue. It shows if your business is making money on paper. But profit doesn’t always reflect how much cash is actually available.

What is Cash Flow?

Cash flow is the movement of money in and out of your business. It includes customer payments, supplier bills, salaries, and loan repayments. Even if your business shows profit, poor cash flow can mean you don’t have money on hand to pay bills.

Why the Difference Matters

• A business can be profitable but still fail due to cash shortages.
  
• Strong cash flow ensures you can pay employees, cover expenses, and invest in growth.
  
• Profit is important for long-term sustainability, but cash flow is about day-to-day survival.

A Simple Example

Imagine selling a product worth ₹10,000 on credit. It adds to your profit instantly, but until the customer pays, your cash flow doesn’t improve. This gap is where many businesses struggle.

The Bottom Line

To build a strong business, you need both-profit to show growth, and healthy cash flow to keep the lights on.