Introduction: “But We’re Making a Profit… So Why Is the Bank Account Empty?”

There’s a moment many business owners experience but rarely talk about.

The month looks good on paper. Sales are up. The profit and loss statement shows a healthy number at the bottom. Yet when you open your banking app, the balance feels… underwhelming. You might even double-check the screen, wondering if you’re looking at the right account.

“How can the business be profitable,” you think, “but we’re still stressing about cash?”

I’ve heard this question countless times from small and medium business owners across South Africa — from retail shops in busy town centres to service businesses running on tight margins. On the surface, the business appears to be doing well. But behind the scenes, the bank account tells a different story. It’s like seeing a restaurant packed with customers while the kitchen runs out of ingredients. The activity is there, but the fuel is running low.

The confusion usually comes down to one simple misunderstanding: profit and cash flow are not the same thing.

Profit tells you whether your business model is working. Cash flow tells you whether your business can breathe. Mix the two up, and you can end up with a profitable business that slowly suffocates — not because it’s failing, but because the money isn’t moving when it’s needed.

Understanding the difference isn’t just an accounting lesson. It’s a survival skill for any business owner who wants to move from constantly “just coping” to running a business with clarity and control.

Profit Is the Scoreboard — Cash Flow Is the Oxygen

Imagine watching a rugby match where the scoreboard says your team is winning, but on the field the players are gasping for air. The points might look good, but without oxygen, the game can’t continue. That’s the relationship between profit and cash flow in a business.

Profit is an accounting measure. It tells you whether, over a period of time, your income is greater than your expenses. It’s important. It shows whether your business is fundamentally viable. But profit doesn’t tell you when the money actually arrives in your bank account — and timing is everything.

Cash flow, on the other hand, is the real-world movement of money in and out of your business. It’s what pays salaries, suppliers, rent, and SARS. Without healthy cash flow, even a profitable business can feel like it’s constantly running on fumes.

I once worked with a professional services firm that was “doing well” by most measures. Their monthly reports showed a consistent profit. But when we dug a little deeper, we saw that most of that profit was sitting in unpaid invoices. Clients were taking 45 to 60 days to pay, while salaries and expenses were due every month. On paper, the business looked strong. In reality, the owner was regularly dipping into an overdraft just to keep things moving.

This gap between when income is earned and when cash is received is where many profitable businesses start to struggle. It’s like being promised water at the end of a long run, while your throat is already dry. The promise might be real, but your body needs relief now.

If you only look at profit, you might believe everything is fine. But if cash isn’t flowing when it’s needed, the business can quickly find itself in trouble — not because it isn’t making money, but because it can’t access that money in time.

Late Payments Turn Profit into Pressure

If profit is the promise of water at the end of the run, late payments are the dry stretch in between that leaves you parched and slowing down. On paper, your business may be doing well. In reality, your cash is stuck in someone else’s bank account.

Late payments are one of the biggest reasons profitable businesses in South Africa still struggle to stay afloat. In many industries — construction, agencies, professional services — long payment terms and delayed settlements are treated as normal. But “normal” doesn’t mean harmless. Every late payment quietly shifts the financial burden from your customer to you. Without realising it, you start funding other people’s businesses while trying to keep your own running.

I once worked with a small construction contractor who had steady work lined up for months. The projects were profitable. The margins made sense. But the payment terms were 60 days, and in practice, some payments took even longer. Meanwhile, wages had to be paid weekly, materials upfront, and fuel daily. The business wasn’t failing — it was being squeezed. The owner described it as running uphill with a backpack full of bricks: the work kept coming, but every step felt heavier than the last.

Late payments create pressure in several ways:

• Cash gaps widen: Money you’ve earned isn’t available when you need it.

• Operational strain increases: Paying suppliers and staff becomes a monthly juggling act.

• Stress becomes the norm: Instead of planning ahead, you’re constantly reacting to shortfalls.

For many business owners, this pressure becomes so familiar that it feels like part of entrepreneurship. But it doesn’t have to be. Understanding how late payments distort the relationship between profit and cash flow is the first step toward building systems that protect your business — from tighter payment terms and clearer invoicing to better debtor management. Profit keeps the promise alive, but timely cash flow keeps the business moving forward.

Growth Can Drain Cash Faster Than It Generates Profit

Growth is often celebrated as the goal of every business. More clients. More sales. Bigger operations. But growth has a lesser-known side effect: it usually demands cash upfront, long before it rewards you with profit.

I’ve seen business owners proudly announce that they’re expanding — taking on more staff, buying more stock, upgrading equipment, moving into larger premises. On the surface, these are signs of success. But behind the scenes, growth can behave like a thirsty guest who arrives early and drinks from your reserves before bringing anything to the table.

Consider a small retail business that decides to expand its product range ahead of a busy season. More stock is ordered. Suppliers are paid. Shelves are filled. The sales eventually come — but only weeks later. In that gap, cash is tied up in boxes and inventory. The business might be profitable by the end of the season, but the short-term cash squeeze can feel like trying to sprint while carrying heavy shopping bags in each hand.

This is what many business owners experience when growth outpaces cash flow:

• Upfront costs increase: stock, staff, equipment, marketing.

• Cash is locked into assets: inventory, projects in progress, unpaid invoices.

• The pressure to fund growth personally grows: overdrafts, personal savings, short-term credit.

Growth, without cash flow planning, can quietly turn a strong business into a fragile one. It’s not that growth is bad — it’s that growth needs fuel. Without enough cash in the tank, even a profitable expansion can stall halfway up the hill.

VAT and Tax Can Catch Profitable Businesses Off Guard

Tax has a way of arriving like the bill at the end of a long meal — when you’ve already enjoyed the evening and forgotten what you ordered along the way. For many profitable businesses, VAT and tax obligations don’t feel urgent until they’re suddenly due, and by then, the cash that should have been set aside has already been spent.

One of the most common scenarios I see is this: a business collects VAT from customers as part of its sales and uses that money to cover day-to-day operating costs. On paper, the business looks profitable. Cash is flowing in. But when the VAT return is due, the business realises that a portion of that “available” cash was never really theirs to spend. It belonged to SARS. The profit might be real, but the cash isn’t fully free.

The same applies to provisional tax. Tax is calculated based on profits earned, not on whether you’ve been paid yet. This creates a timing mismatch that can catch business owners off guard — especially when large invoices are still outstanding. It can feel like being asked to pay for a meal that’s still being cooked in the kitchen.

This is how tax quietly tightens the cash flow squeeze:

• VAT collected feels like usable cash, but it isn’t.

• Tax liabilities are real, even if customers haven’t paid yet.

• Poor tax planning magnifies cash flow stress.

Many profitable businesses don’t struggle because they can’t earn — they struggle because they don’t separate what belongs to the business from what belongs to SARS. Without that separation, profit can create a false sense of security, while cash flow quietly grows more fragile.

Without Cash Flow Tracking, You’re Flying Blind

Running a business without tracking cash flow is like flying through low cloud without instruments. The engine might be running smoothly, the destination might be clear in your mind, but without visibility, you’re relying on instinct in conditions that demand precision.

Many business owners review their profit and loss statements monthly or quarterly and assume that’s enough. But profit reports look backwards — they tell you how you performed. Cash flow tracking looks forward — it tells you whether you’ll have enough money to meet your obligations in the weeks and months ahead.

I worked with a small professional firm that always felt “on edge” financially, despite steady profits. There was no major crisis, just a constant low-level tension around money. When we introduced a simple cash flow forecast — nothing complex, just expected inflows and outflows for the next 60 days — something shifted. Decisions became calmer. The owner stopped reacting to every dip in the bank balance and started planning around predictable cycles. The business didn’t suddenly become richer, but it became steadier.

Without cash flow visibility:

• Problems surface late: You only notice shortfalls when the bank balance is already low.

• Decisions become reactive: You respond to pressure instead of planning ahead.

• Opportunities feel risky: Growth or investment feels scary when you don’t know what’s coming next.

Cash flow tracking doesn’t remove uncertainty from business, but it replaces guesswork with foresight. It’s the difference between steering in the dark and switching on the headlights.

Conclusion: Profit Keeps Score, Cash Flow Keeps You Alive

If profit is the scoreboard, cash flow is the oxygen mask. One tells you how well the game is going. The other determines whether the game can continue at all.

Many small and medium-sized businesses in South Africa don’t fail because their ideas are bad or their services aren’t needed. They fail because, at some point, the cash simply dries up — even while the business still looks “profitable” on paper. Late payments, growth costs, tax obligations, and a lack of cash flow visibility slowly tighten the space your business has to breathe.

The encouraging truth is that this isn’t a problem of capability — it’s a problem of clarity. Once business owners understand the difference between profit and cash flow, they start to make different decisions. They price differently. They negotiate payment terms more confidently. They plan growth with a clearer view of the cash it requires. And they treat tax money as what it is: not available spending money, but a responsibility already accounted for.

If there’s one simple action to take from this, it’s this:
Start looking at your cash flow with the same seriousness you give your profit.

Even a basic cash flow forecast can change how you experience your business. It replaces constant financial tension with informed calm. And over time, that calm creates space — space to think, to plan, and to grow without feeling like the ground might shift beneath your feet.