Profit is not cash.

It's possible to close a profitable month and still not have enough cash to make payroll. This confuses a lot of founders, and it shouldn't. The two numbers are measuring different things.

Profit is an accounting figure. It counts revenue when it's earned and expenses when they're incurred, regardless of when money actually moves. Cash is what's in the bank right now. A big invoice you sent last month counts as revenue today, but if the client pays in 60 days, it does nothing for your bank balance this month.

The gaps that trip founders up: customers who pay slowly, inventory or prepaid expenses that use cash before they hit the P&L, loan repayments that don't show up as expenses at all, and one-time costs like equipment or deposits that hit cash hard but get spread out in accounting.

The fix isn't complicated. It's a habit. Alongside your P&L, keep a simple cash flow statement or a rolling 13-week cash forecast. Track what's actually coming in and going out, not just what's been earned and incurred.

Profit tells you if the business model works. Cash tells you if you'll still be here next quarter. You need both, but if you can only look at one number under pressure, look at cash.

Who wrote this

Shafneed is the founder of Simplify, a finance clarity and investment readiness practice working with founders across India. He writes about the questions founders bring before a decision, not after it.