The difference between Profit and Cashflow

Have you ever been caught off-guard when your accountant told you that you have made a profit and had to pay tax, whilst your bank account echoed like an empty chamber? Rest assured, you’re not the only one. 

So, let’s look at the difference between profit and cashflow. I realize that since Covid and lockdowns became the new normal, profits and cashflow may be grouped with unicorns and the pot of gold at the end of the rainbow; but hey, I remain an optimist.

10 Solutions to Cashflow challenges

1.       Budget for future big-ticket expenses

2.       Create provision funds for specific expenses – VAT, TAX, Bonus, Emergency

3.       Don’t operate too close to the fence

4.       Don’t strip all cash and profit from the business

5.       Set aside taxes to be paid

6.       Clear stock at lower prices to free up cashflow

7.       Offer a discount for early payment

8.       Credit check before extending credit

9.       Send out invoices immediately, and follow up on payments

10.   Outsource certain business functions if full-time resources are not required.

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