Why Profitable Businesses Still Fail #
Prepared by: Zingisa Business Services (Pty) Ltd
Length: ±6 pages
PAGE 1 – INTRODUCTION #
Many businesses fail not because they are unprofitable, but because they run out of cash.
Understanding the difference between profit and cash flow is essential for business survival and growth.
This guide explains:
- The difference between profit and cash flow
- Why profitable businesses experience cash shortages
- How to manage cash flow proactively
PAGE 2 – WHAT IS PROFIT? #
Profit is an accounting measure that reflects income earned minus expenses incurred during a period.
It does not indicate:
- When cash is received
- When suppliers are paid
- Whether the business can meet short-term obligations
PAGE 3 – WHAT IS CASH FLOW? #
Cash flow reflects the actual movement of money in and out of the business.
Cash flow determines:
- Ability to pay suppliers and staff
- Capacity to service debt
- Business sustainability
A business can be profitable and still experience negative cash flow.
PAGE 4 – WHY PROFITABLE BUSINESSES FAIL #
Common reasons include:
- Customers paying late
- High inventory levels
- Rapid growth without funding
- Poor cash forecasting
- Heavy capital expenditure
Without active cash management, profitability alone does not guarantee survival.
PAGE 5 – MANAGING CASH FLOW EFFECTIVELY #
Effective cash management includes:
- Cash flow forecasting
- Active debtor management
- Aligning payment terms
- Understanding working capital
- Planning funding requirements
PAGE 6 – CONCLUSION & CALL TO ACTION #
Cash Flow is King #
Profit measures performance.
Cash flow ensures survival.
Zingisa Business Services supports businesses in developing cash and funding strategies that protect liquidity and support growth.
Contact us to strengthen your cash position.
