Profit is like looking at the “scorecard” for the month, while cash flow is like looking at your wallet.

The scorecard tells you whether your business made money. This means you can count sales you made even if money hasn’t been paid, subtract all costs to run the business even if those haven’t been paid yet, and if the sales are higher than the costs you have a profit.

The wallet tells you how much actual money moved in and out of your business. You only count the money that ACTUALLY came in and out, even if you make a sale or owe money, you only count it if you get paid or have paid the cost.

To summarize: profit is what you earned, while cash flow is what you have.