Cash flow, not profit, is what keeps a small business alive from one month to the next. A firm can be profitable on paper and still fold because the money does not arrive in time to pay wages and suppliers. Below are the questions we are asked most often about keeping cash moving.
What is the difference between profit and cash flow?
Profit is what is left after costs once a sale is counted. Cash flow is the actual money moving in and out of your account on a given day. You can make a sale in March, count it as profit, and not see the cash until June. Managing that gap is the heart of survival for most small firms.
How do I get paid faster?
- Invoice the moment a job is done, not at the end of the month.
- State clear, short payment terms and put the due date in plain sight.
- Offer easy ways to pay, such as a bank link or card option.
- Follow up politely but promptly the day a payment becomes overdue.
How much cash should I keep in reserve?
A common rule of thumb is to hold enough to cover three months of essential costs, though even one month is a strong start. Build it gradually by setting aside a small slice of every payment you receive rather than waiting for a good month that may never come.
What is the most common mistake?
Confusing a busy period with a healthy one. Plenty of work does not help if customers pay slowly and your own bills fall due first. Watch the timing of money, not just the volume of orders, and you will sleep far better.