20/02/2026
๐๐๐ฌ๐ก๐๐ฅ๐จ๐ฐ ๐ฏ๐ฌ. ๐๐ซ๐จ๐๐ข๐ญ: ๐๐ก๐ฒ ๐๐๐ง๐ฒ ๐๐ข๐ ๐๐ซ๐ข๐๐ง ๐๐๐๐ฌ ๐๐ซ๐ ๐๐จ๐ง๐๐ฎ๐ฌ๐๐
Most business entrepreneurs always mention something potentially risky:
"We made a profit last month, so we're fine."
But a few weeks later,
They cannot pay suppliers.
Staff salaries have been delayed.
Rent is due.
So, what happened?
Let us break it down simply.
๐๐ซ๐จ๐๐ข๐ญ
Profit is the amount that remains after deducting expenses from income.
It is included in your financial statements.
This includes:
โข Sales done with credit
โข Expenses incurred but not paid.
โข Depreciation (a non-cash cost)
Profit is an accounting figure.
๐๐๐ฌ๐ก๐๐ฅ๐จ๐ฐ
Cashflow refers to the actual movement of money into and out of your bank account.
It answers a single question:
Do you currently have cash on hand?
Only money received and paid are important to cashflow.
No assumptions. No accruals.
๐๐ก๐ ๐๐๐๐ฌ๐จ๐ง๐ฌ ๐๐๐๐ฌ ๐๐๐๐จ๐ฆ๐ ๐๐จ๐ง๐๐ฎ๐ฌ๐๐
1๏ธโฃ Although you made sales, the buyers have not yet paid.
(A profit was noted. No money was received.)
2๏ธโฃ You purchased stock in large quantities.
(The money is gone. Profit is not yet impacted.)
3๏ธโฃ An old supplier debt was settled.
(Cash decreased. No impact on the present profit.
4๏ธโฃ Your collections are low and your receivables are high.
(Books appear attractive. The bank account appears to be empty.
The harsh reality is this:
It is possible for a profitable business to fail.
Because cash flow problems, not a lack of profit, are the reason why firms fail.
For this reason, monthly reporting that is structured is important:
โข Statement of Profit and Loss
โข Statement of Cash Flow
โข Monitoring of accounts receivable
โข Management of accounts payable
Most Nigerian SMEs just check their bank balances.
Serious business operators keep track of both profits and cash flows.
If you don't know the distinction, you can make smart sales decisions but result in terrible cash flow.
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๐ข๐ง๐๐ง๐๐ข๐๐ฅ ๐๐ฅ๐๐ซ๐ข๐ญ๐ฒ ๐ข๐ฌ๐ง'๐ญ ๐ ๐ฅ๐ฎ๐ฑ๐ฎ๐ซ๐ฒ.
๐๐ญ'๐ฌ ๐ ๐ฌ๐ฎ๐ซ๐ฏ๐ข๐ฏ๐๐ฅ ๐ญ๐จ๐จ๐ฅ.
