Profit is the difference between the total of all sales less the total of all costs and expenses for a particular period. Many business owners may realise at some stage that that the profit they make in the business does not equal their cash flow, unless they are dealing solely in cash, which is unlikely today.

However, even profitable businesses cannot survive without cash – think of cash as the oxygen a business needs to stay alive.

A sale can be made today generating the profit but the cash may not be received for perhaps 30 days or more.  How do you fund the costs during that intervening period?  You probably have employees to pay; rent on premises; materials and other costs used to generate the sale; and other business overheads.

Never forget sales tax and corporate taxes which will fall due later. It is vital to understand timings of cash flow both in and out. If that is all true and important, then why does everyone not forecast cash flow?

That is the key question.

In our view it is madness not to.

However, most businesses do not actively manage their cash flow. If in doubt, remember the phrase “cash is king” – like most popular phrases it has been created for a reason.

A similar saying is that “revenue is vanity, profit is sanity and cash flow is reality”.  Also true.

We have never encountered a successful business that does not actively manage their cash flow, and similarly we have never come across a failing business that did actively manage their cash flow.

Whilst some business owners do not want to know or do not have the time to actively manage their cash flow, we believe the biggest reason is that you, the business owner, do not know where to start and do not properly understand cash flow.

Managing cash flow can also help you and your management team identify problems in the business faster than any other diagnostic tool. It should also be remembered that the value of a business is dependent on cash flow, not solely profits.

The aim, outlined in Mastering Cash Flow For Business Owners , is to give you the missing knowledge and to suggest some useful tools to allow you to forecast cash flow. We believe that with a little help, some advice and pointing in the right direction, all business owners can master managing cash flow.

Without that tool, you may well spend money next week that you need the following week.

How will you know without a weekly forecast?

Cash flow management and planning reduces stress and improves your chances of success. It puts the business owner in control of an area that many business owners neglect.

Remember, cash flow worries are the biggest area that keeps business owners awake at night. We can guarantee that effective cash management will make the future even brighter than the past and will mean lots of restful nights with no cash worries.

We can guarantee that effective cash management will make the future even brighter than the past and will mean lots of restful nights with no cash worries.

Three key points to remember:

If you do not make a profit you will not generate positive cash flow from trading.

Without up-to-date historic figures, your current cash position, and a forecast, you will never be able to manage cash flow optimally and effectively.

Cash is king.


Cash Flow Tips Extracted from “Mastering Cash Flow For Business Owners” by Craig Alexander Rattray and Jeff Borschowa, available on Amazon


This article was first published on Daily Business ( on 1 March 2021.