{"id":7110,"date":"2026-07-16T09:48:31","date_gmt":"2026-07-16T08:48:31","guid":{"rendered":"https:\/\/www.bainesjewitt.co.uk\/blog\/?p=7110"},"modified":"2026-07-16T08:48:33","modified_gmt":"2026-07-16T08:48:33","slug":"cash-flow-versus-profit-which-matters-more-to-an-sme","status":"publish","type":"post","link":"https:\/\/www.bainesjewitt.co.uk\/blog\/cash-flow-versus-profit-which-matters-more-to-an-sme\/","title":{"rendered":"Cash flow versus profit \u2013 Which matters more to an SME?"},"content":{"rendered":"

While profit can be seen as the main indicator of business health, the importance of cash flow is often overlooked.<\/p>\n

<\/p>\n

You could be making money on paper but still be broke, unable to meet bill payments and even on the brink of insolvency.<\/p>\n

This balancing act is especially important for SMEs.<\/p>\n

The profit & cash flow conundrum <\/strong><\/h3>\n

Of course, profit is an essential component of a successful business, but it does not provide the complete picture.<\/p>\n

What if a business is making more money than it spends but can\u2019t afford to pay bills or taxes to HMRC? Profit alone can\u2019t be trusted.<\/p>\n

Enter cash flow.<\/p>\n

This metric focuses on the flow of money in and out of the business bank account, reflected in a cash flow statement.<\/p>\n

If a cash flow statement is positive, the business has enough liquidity to cover wages, suppliers and tax liabilities, amongst other expenses.<\/p>\n

So, even a profitable business can have a negative cash flow if money in becomes delayed or costs are paid up front, for example.<\/p>\n

How could this happen?<\/strong><\/h3>\n

Imagine a company called ABC Trading invoiced \u00a315,000 for a project in March but they were due to get paid in August.<\/p>\n

If you were to solely consider profit, the business has just been made \u00a315,000 richer.<\/p>\n

However, in the four months until payment, ABC Trading must cover payroll, rent and the costs of delivering the project.<\/p>\n

Now imagine that this happened several times with projects for different clients.<\/p>\n

With poor cash flow management, this squeeze might push ABC Trading to the verge of insolvency.<\/p>\n

Why does this hit SMEs harder?<\/strong><\/h3>\n

Maintaining profitability and a positive cash flow can be harder for SMEs.<\/p>\n

A lot of cash flow problems faced are not necessarily the fault of the business.<\/p>\n

They can result from late-paying customers, rising industry costs or even administrative errors.<\/p>\n

Typically, smaller companies have thin cash reserves, a smaller client base and fixed costs that are proportionately higher than bigger operations.<\/p>\n

Also, it isn\u2019t unheard of for small business owners to act as guarantors on loans or leases, meaning poor cash flow management can also impact personal finances.<\/p>\n

This is why SMEs feel the pressure much more.<\/p>\n

An accountant can help to relieve the strain by protecting small business owners from cash flow crises and personal financial risk.<\/p>\n

While smaller operations are unlikely to have the resources for an in-house accountancy team, outsourcing can give them the benefits without additional costs.<\/p>\n

Five cash-flow management techniques<\/strong><\/h3>\n

Considering how important cash flow is for day-to-day operations and business success, here are some strategies to ensure it remains positive.<\/p>\n

    \n
  1. Monitor and forecast cash flow regularly – <\/strong>create rolling cash-flow forecasts to predict future income and avoid cash shortages.<\/li>\n
  2. Improve payment terms<\/strong> – chase invoices consistently and offer multiple payment options to clients.<\/li>\n
  3. Keep a cash buffer <\/strong>– costs can arise when you aren\u2019t expecting them, so cash reserves can prevent financial strain.<\/li>\n
  4. Funding and grants <\/strong>\u2013 funding and grants can inject working capital into an SME without adding repayment liabilities or watering down business ownership.<\/li>\n
  5. Be strategic with spending <\/strong>\u2013 explore whether it is possible to negotiate flexible payment terms with suppliers. Prioritise essential expenses whilst delaying those that are non-critical.<\/li>\n<\/ol>\n

    How can we help?<\/strong><\/h3>\n

    While a month of poor profit is bad, it isn\u2019t nearly as bad as a month of poor cash flow.<\/p>\n

    Luckily, these problems can be mitigated by careful financial planning, so you can flag problems before they cause damage.<\/p>\n

    Our team can help you out with creating cash flow forecasts, tax plans and financial planning to make sure you can always meet obligations.<\/p>\n

    Get in touch today to become more confident with cash flow.<\/p>\n","protected":false},"excerpt":{"rendered":"

    While profit can be seen as the main indicator of business health, the importance of cash flow is often overlooked.<\/p>\n","protected":false},"author":2,"featured_media":7113,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,125,30,132,25,4],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/7110"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=7110"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/7110\/revisions"}],"predecessor-version":[{"id":7111,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/7110\/revisions\/7111"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/7113"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=7110"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=7110"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=7110"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}