A few years ago, a client of mine—a successful restaurant owner in Durban—called in a panic. “Doug, my books say I made a profit this month, but I can’t pay my suppliers. How’s that possible?”
It’s a question I’ve heard too many times, and it captures a lesson every South African business owner eventually learns: profit doesn’t keep your doors open—cash does.

Think of profit as a photograph — a snapshot showing how your business performed on paper. Cash flow, on the other hand, is a live video feed of your business in motion. It shows whether money is actually coming in fast enough to cover what’s going out. You can have a beautiful picture of profitability while your bank balance quietly runs dry.

In South Africa, where load shedding, delayed payments, and fluctuating interest rates can hit even the strongest businesses, cash is your oxygen. You can survive for a while without profit, but the moment cash stops flowing, everything grinds to a halt.

This article unpacks why managing cash flow matters more than chasing big profits, and how understanding this difference can help your business stay healthy, flexible, and ready for the next challenge.

Cash Flow vs Profit — What’s the Difference (and Why It Trips Business Owners Up)

Let’s go back to that Durban restaurant owner. Every month, his accountant sent a report showing healthy profits. But customers paid by card, meaning he received the money a few days later. Meanwhile, suppliers wanted payment upfront, and the rent came due before most of his income cleared. On paper, he was thriving. In reality, he was juggling invoices and overdrafts to stay afloat.

This is the heart of the issue: profit is theoretical; cash flow is practical.
Profit measures how well you’ve performed, while cash flow measures whether you can keep performing tomorrow.

In simple terms:

• Profit = Income – Expenses (recorded when they happen, not when cash moves).

• Cash flow = Money that actually enters and leaves your account.

It’s like the difference between promising to pay and having cash in your wallet. A sale might look great on your income statement, but if your client takes 60 days to settle, that “profit” won’t help you pay your staff next week.

Even businesses with great margins can stumble if their money timing is off. Late customer payments, upfront supplier costs, or VAT obligations can all create temporary droughts in your bank account. And while a drought can pass, it often leaves deep cracks—missed payments, strained relationships, and sleepless nights wondering if payroll will clear.

Here’s a practical example: imagine you sell R500,000 worth of goods in a month, but customers only pay after 45 days. Meanwhile, your suppliers demand payment in 30 days. That 15-day gap might not sound like much, but it’s a hole in your cash flow big enough to sink a small business if it repeats month after month.

As accountants, we often tell clients: profit is a goal; cash flow is a discipline. You can forecast profit, but you must manage cash every single day. The more you understand how cash moves—where it gets stuck, delayed, or wasted—the more control you have over your business future.

The Three Numbers to Watch — Debtor Days, Creditor Days, and Inventory Days

When it comes to cash flow, timing is everything.

You might be selling well, but if your money arrives long after your bills are due, it’s like trying to fill a bucket with a hole at the bottom. That’s where three key metrics—Debtor Days, Creditor Days, and Inventory Days—come in. Together, they make up what accountants call the Cash Conversion Cycle (CCC). Think of it as your business’s “heartbeat.” The faster it beats, the healthier your cash flow.

Debtor Days: How Long It Takes to Collect What You’re Owed

Let’s start with your debtors—the customers who owe you money.
Imagine you’ve done everything right: delivered great service, issued the invoice, and even received a thank-you email. Yet, weeks later, the payment still hasn’t arrived. That’s cash stuck in limbo, money you can’t use to pay suppliers or staff.

For South African SMEs, long payment terms are a silent killer. Many large corporates take 60 to 90 days to pay small suppliers, leaving business owners scrambling to bridge the gap. The longer you wait, the tighter your cash becomes.

Practical steps to shorten debtor days:

• Send invoices immediately—don’t wait for month-end.

• Offer small discounts for early payments.

• Use automated reminders (tools like Xero, Sage, or QuickBooks make this painless).

• Introduce upfront deposits or milestone payments for big jobs.

Example: A Cape Town design agency reduced its average debtor days from 62 to 43 simply by adding a 50% deposit policy and automating reminders. Within two months, their bank balance looked healthier—and so did their stress levels.

Creditor Days: How Long You Take to Pay Suppliers

Next comes your creditors—the people you owe money to.
Managing creditor days isn’t about paying late; it’s about paying smart. If your suppliers offer 30 days but you always pay in 10, you’re giving away precious breathing room.

Negotiating better terms—say, 45 or 60 days—can keep cash in your account longer, helping you fund operations without extra borrowing. The key is communication and trust. Reliable suppliers are often happy to extend terms if you’ve proven to pay consistently.

Tip:
When cash flow is tight, call your top three suppliers before defaulting. A transparent conversation can open more doors than an apology after the due date.

Example: A Johannesburg construction company extended creditor terms by 15 days across five major suppliers. The result? An extra R250,000 available each month for salaries and materials—without a single loan.

Inventory Days: How Long Stock Sits Before It’s Sold

Lastly, inventory days show how quickly you turn stock into cash.
If products linger too long on shelves, they trap cash—money literally gathering dust. The goal is to balance having enough stock to meet demand without tying up all your working capital.

Ways to reduce inventory days:

• Review slow-moving items monthly.

• Apply “ABC analysis”: focus on the 20% of products that bring in 80% of sales.

• Use supplier data to forecast demand more accurately.

• Offer discounts or bundles on slow stock to free up cash.

Example: A Durban retailer ran a clearance sale on old inventory, freeing up R120,000 in cash and making space for high-turnover summer stock. Profit margins dipped slightly that month—but overall cash flow improved dramatically.

Bringing It Together: Your Cash Conversion Cycle

These three levers—Debtor Days, Creditor Days, and Inventory Days—combine into one powerful formula:

Cash Conversion Cycle = Inventory Days + Debtor Days – Creditor Days

The shorter your cycle, the faster cash moves through your business.
It’s like tightening the gears of a machine—less friction, smoother motion, better performance.

When you manage these numbers actively, cash flow stops being unpredictable. You’ll know when cash will arrive, where it’s getting stuck, and how to keep it flowing without relying on luck or overdrafts.

Forecasting Cash Before It’s a Crisis — The 13-Week Cash Flow Plan

If profit is your scorecard, cash flow forecasting is your radar. It helps you spot trouble long before it hits. Too many South African businesses only realise there’s a cash crunch when the debit orders bounce — but by then, it’s already too late.

A 13-week cash flow forecast is simple but powerful. It maps out your next three months of money in and money out — salaries, rent, VAT, supplier payments, and expected receipts. Think of it as a weather forecast for your bank balance: you can’t stop the rain, but you can carry an umbrella.

You don’t need fancy software — a basic spreadsheet will do. Start with your opening balance, then track all incoming payments (who’s paying and when) and outgoing expenses (what’s due and when). Update it weekly. This rolling view helps you make decisions early — like chasing payments, delaying non-essentials, or talking to your bank before it’s urgent.

Example:
A small manufacturing firm in Gauteng used a 13-week forecast to spot a cash dip six weeks ahead. By tightening debtor follow-ups and staggering supplier payments, they avoided a R150,000 overdraft extension — and a lot of stress.

The takeaway? Cash surprises are only bad when they’re unexpected. Forecasting gives you control, clarity, and confidence — three things every business owner needs to sleep better at night.

Quick Wins to Unlock Cash This Quarter

Sometimes, improving cash flow doesn’t require a complete financial overhaul — just a few smart, immediate tweaks. Think of these as “pressure release valves” for your business’s finances: small actions that quickly free up trapped cash and reduce stress.

Here are a few that work especially well for South African SMEs:

• Invoice faster, get paid faster.
  Don’t wait for month-end — send invoices the moment work is done. Every day you delay is another day your money sits in someone else’s account.

• Request deposits or milestone payments.
  Whether you’re in construction, design, or consulting, asking for 30–50% upfront keeps your cash moving in sync with your effort.

• Make it easy to pay you.
  Add card links, QR codes, or payment gateways like PayFast and Yoco to your invoices. When payment is one click away, clients settle quicker.

• Chase debtors — politely but consistently.
  Automated reminders work wonders, but a personal phone call often works better. It shows you’re watching your money closely.

• Review recurring expenses.
  Cancel software subscriptions or services you no longer use — those small monthly charges add up.

• Move slow stock.
  Bundle, discount, or liquidate older inventory to turn it into usable cash.

Example:
A Cape Town marketing agency introduced card payment options and required 50% deposits before starting new projects. Within two months, their average payment turnaround dropped from 45 days to just 18 — freeing up enough cash to fund a new hire without touching their overdraft.

The lesson? You don’t always need more revenue to fix your cash flow. Sometimes, you just need to collect what’s already yours — faster and smarter.

Funding Options That Support — Not Strangle — Cash Flow

There’s a moment every business owner faces: cash is tight, opportunities are waiting, and you need funding to bridge the gap. The trick is finding the kind of finance that helps you breathe—not one that slowly chokes your business.

When used wisely, funding can strengthen your cash position instead of straining it. Here’s how to approach it smartly:

• Working Capital Facilities:
  Short-term overdrafts or revolving credit can cover timing gaps between paying suppliers and receiving customer payments. Just remember—these should act like a safety net, not a hammock.

• Invoice Financing or Factoring:
  If you’re waiting 60 or 90 days for clients to pay, invoice financing lets you access a portion of that cash immediately. You’ll pay a fee, but it’s often cheaper than missing payroll or delaying orders.

• Asset Finance:
  Buying equipment? Instead of draining your savings, use asset finance to spread payments over time. It aligns the cost of the asset with the income it helps you generate.

• Seasonal Overdrafts or Credit Lines:
  Particularly useful for businesses affected by SA’s seasonal cycles—like tourism or retail. Arrange them before the busy season, not when cash has already run dry.

Example:
A furniture manufacturer in Johannesburg used invoice financing during its peak season to unlock R500,000 in unpaid invoices. The cost was modest compared to the lost revenue they would’ve faced without the working capital to fulfil new orders.

The rule of thumb: Match the life of the finance to the life of the need.
Use short-term facilities for short-term gaps and long-term loans for assets that earn over years. The wrong match is what turns helpful funding into a financial noose.

Cash Is the Lifeblood of Your Business

You can survive for months without profit — but not a single week without cash.
That’s the uncomfortable truth every seasoned business owner learns eventually. Profit might impress investors, but cash flow keeps your business alive day to day. It pays your staff, fuels your growth, and cushions you when the economy tightens.

The good news? You don’t need to be an accountant to manage it well. With a few steady habits — forecasting your cash, shortening debtor days, managing suppliers smartly, and reviewing your expenses regularly — you can turn cash flow from a constant worry into a quiet strength.

Think of it this way: profit is your destination, but cash flow is the road that gets you there.
And the smoother that road, the further your business can go.

Action Step:
This week, take 30 minutes to look at your cash position. Identify one bottleneck — maybe it’s slow-paying customers or unplanned VAT bills — and make a small change.
You’ll be surprised how quickly small improvements compound into real breathing room.

If you’d like practical help building your own 13-week cash flow plan or benchmarking your business’s cash conversion cycle, our team is here to guide you — so your profits mean more, and your cash flow never leaves you gasping for air.