Profit and cash answer different questions. Profit tells you whether income exceeded expenses over a period. Cash flow tells you whether money arrived in time to pay the bills.

A business can make a sale today and only receive the money next month. The sale may contribute to profit immediately, while the cash is still sitting in an unpaid invoice.

A simple example

Imagine you issue R20,000 of invoices in October and have R12,000 of October expenses. On paper, that suggests R8,000 before tax and other adjustments.

If customers only pay R6,000 during October, but you must pay all R12,000 of the expenses, your bank balance moves down by R6,000. The business can look profitable for the month while cash is tight.

Watch these numbers separately

Use a short weekly check:

  1. Sales issued: the value of completed, issued work.
  2. Cash received: payments that actually reached the business.
  3. Current outstanding: invoices that still have a balance.
  4. Overdue balance: unpaid amounts past their due dates.
  5. Committed costs: salaries, suppliers, rent, tax and other payments due soon.

Do not count an invoice allocation as new cash when the receipt itself has already been recorded. That would count the same money twice.

Improve the timing of cash

  • Send accurate invoices promptly.
  • Put a clear due date and payment reference on each invoice.
  • Ask for deposits when the work requires significant upfront cost.
  • Follow up before and shortly after the due date.
  • Record partial payments so the remaining balance is clear.
  • Agree supplier terms that match the way your customers pay, where possible.
  • Keep a buffer for tax and irregular expenses.

The South African Government’s small-business guidance includes cash needs, break-even sales and monthly costs as core parts of financial planning. Those questions are useful even for an established business.

Use a rolling view

A monthly profit report can hide a difficult week. Keep a simple forecast covering at least the next several weeks. Start with the current bank balance, add expected customer receipts by realistic payment date and subtract known payments by their due dates.

Update it when an invoice is delayed, a customer pays or a new cost is committed. The goal is not perfect prediction. It is enough warning to make a decision before the bank balance becomes the decision.

This article provides general business information. Ask your accountant or financial adviser for guidance based on your records and obligations.