The 7 Deadly Sins of Cash flow (mis)Management

A question I get asked, time and again by clients, is this: “If I’m making a profit, why do I never have any money in the bank?” Here is the short answer, and this is important to remember: profit and cash flow are two very different things. Firstly, profit equals ‘on paper revenue’ minus ‘on paper expenses’, and not necessarily money in the bank. Cash flow equals the actual money flowing into and out of your business at any given time and is affected by the timing of liability payments, loan repayments, Directors’ drawings, the time it takes your debtors to actually pay, and so on. The problem is, cash flow lags behind profit for most businesses.