Profit is "Sales minus Expenses." Cash Flow is "Money In minus Money Out." They are not the same thing because they happen at different times.
If you spend $50,000 on materials in January, but your client doesn't pay the $80,000 invoice until April, you have a $30,000 profit on paper—but you might go bankrupt in February because you have $0 cash in the bank.
The Cash Flow Timeline Problem
Most business failures aren't caused by lack of profitability—they're caused by timing mismatches between expenses and revenue. You pay for things before you get paid for them.
The Fix: Invoice Terms & Deposits
- Shorten payment terms: Use "Net 15" instead of "Net 30."
- Require deposits: Ask for 50% upfront on all large Quotes.
- Invoice immediately: Don't wait. Send the invoice the moment work is completed.
- Offer early payment discounts: "2/10 Net 30" incentivizes clients to pay early.
- Build a cash reserve: Keep 3-6 months of expenses in savings as a buffer.