Cash vs profit

Profit and cash answer two different questions, and confusing them sinks businesses. Profit is revenue minus costs over a period — an accounting measure of whether the business model works. Cash is the money actually available right now to pay bills. They diverge because of timing: you often pay for inventory, wages, or equipment before the sales they enable arrive, and customers may pay late. A business can be profitable on paper yet run out of cash if too much is tied up in unsold stock or unpaid invoices — a working-capital squeeze. That is why 'profit is not cash' is a founder's first hard lesson: survival depends on cash flow, the timing of money in and out, not just on being profitable over the year. Watching cash, not only the bottom line, is what keeps the doors open.