Why a profitable business can still feel financially constrained.
Profit describes economic performance over a period. Cash flow describes when money actually enters and leaves the business.
Timing differences in receivables, inventory, debt and capital purchases can make the two measures move very differently. That is why profitable growth can create a surprising demand for cash.
A rolling cash forecast, paired with accurate financial statements, helps owners see both the performance of the business and its capacity to meet upcoming commitments.
This article is general educational information for a fictional demonstration brand and is not tax, legal or accounting advice for a specific situation.