cash flow
Cash flow is the money actually moving in and out of your hands each month, which is not the same thing as profit.
In plain English
Profit is an opinion. Cash flow is a fact.
A business can be profitable on paper and still collapse, because the customers who owe it money have not paid yet and the rent is due today. That is not a strange edge case. It is one of the commonest ways good Nigerian businesses die.
The same is true for a person. You can earn well and still be unable to pay for something on the fifteenth of the month, because your money arrives once and leaves continuously.
Cash flow is simply this. What actually came in, what actually went out, and when. Positive cash flow means more arrived than left. Negative means you are living on a buffer, and buffers run out.
Understanding it is what turns you from someone who reacts to money into someone who runs it. It shows you the gap between the day your rent is due and the day your salary lands. It shows you the client who always pays sixty days late and has quietly become your biggest problem.
Track it for three months and you will know more about your finances than most people learn in a decade.
Your business invoices ₦4 million in January and records it as revenue. But only ₦1.5 million actually arrives, because two clients pay late. Your rent, salaries and supplies come to ₦2.2 million. You are profitable and you cannot pay your staff. That gap is cash flow.
Questions people ask
What is the difference between profit and cash flow?
Profit counts money you have earned, even if it has not arrived. Cash flow counts only money that has actually moved. A business can have one without the other, and only one of them pays the rent.
How do I improve my cash flow?
Get paid faster, pay out slower where you fairly can, and keep a buffer. Chasing an unpaid invoice is often worth more than winning a new client.
Does cash flow matter for individuals?
Very much. Knowing exactly when money lands and when it leaves is the difference between planning and panicking.
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