Business Finance

Cash Flow Basics: Why a Profitable Business Can Still Feel Short of Cash

Why profit and bank balance are not the same thing — and what to watch each month.

A business can report a profit and still struggle to pay bills. Profit measures income and expenses under accounting rules; cash flow tracks when money actually moves.

Watch timing

Customers may pay after revenue is earned, while suppliers, payroll and taxes may be due sooner.

Separate tax reserves

A healthy bank balance can include GST/HST collected or money that will later be needed for income tax.

Monitor receivables and upcoming bills

Knowing who owes the business and what is due next creates a more useful picture than looking only at today's balance.

Use a short forecast

A simple 30- to 90-day view of expected inflows and outflows can identify pressure before it becomes urgent.

Official sources