Many profitable companies still run out of cash, because profit and cash are different things. Learning to read cash flow is what keeps you solvent.
Profit is not cash
You can be profitable on paper and still unable to pay a bill this week, because sales made are not the same as cash received. Cash flow shows the money actually moving, which is what pays wages and loans.
Watch the timing
Cash difficulties are usually timing problems: money goes out before it comes in. A cash-flow view highlights those gaps in advance, so you can act — chase a debtor, move a payment, arrange a bridge.
Use it to decide
Let cash flow, not the profit-and-loss, drive your short-term decisions in difficulty. It is the number that tells you whether you can meet the next obligation.
A cash-flow forecast turns this understanding into a forward-looking tool.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: Why a rolling forecast beats a static budget in difficulty, Building a thirteen-week cashflow forecast, How to build a simple budget when cash is tight.