The ideal position for any business is to be profitable and cash generative. But it’s much harder to survive without cash than profit.
That said, profitability is a measure of success. Profit - from Latin meaning ‘to make progress’ - reflects development, increased wealth and status. Profit is a want, cash is a need.
A business that isn’t profitable can survive for long periods of time with adequate cash flow. Some business owners are content simply paying the bills and taking a healthy salary. Profit isn’t necessarily an objective.
Even if profit is an objective, insufficient cash flow stumps growth and undermines a business’s ability to survive. In addition, a cash generative business has increased potential to be profitable because the disciplines necessary to ensure healthy cash flow will invariably promote profitability.
Cash is needed not only for survival but for growth upon which to build profitability - which may be your ultimate want - so cash flow is critical whatever your objectives.
Download guide - Cashflow management: the basics
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