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Profit is not cash in the bank
Profit and cash flow measure different things.
The idea
A recorded sale may create profit before the customer pays. Cash timing determines whether bills can be paid now.
An example
A profitable business with unpaid invoices can still struggle to cover wages this week.
Put it into practice
Track when money arrives and leaves, not only reported profit.
Further reading: OpenStax · Entrepreneurship ↗
Test yourself: Why can a profitable firm be short of cash?
Customers may not have paid yet
Recorded earnings and actual receipts can occur at different times.
Explanation and illustrative examples by One Card Wiser. Source linked for further reading.
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