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What’s the Difference Between Profits and Cash Flow?

 
  Arthur F. Rothberg, Managing Director, CFO Edge, LLC  
   
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  Article Summary  
In a recent article, we discussed the importance of understanding your company’s cash flow cycle and offered some tips for shortening your cycle in order to improve cash flow.

This discussion, however, assumes an understanding of a basic financial concept: the difference between cash flow and profits. It can be easy to make this critical mistake -- which unfortunately, has led to the demise of many small and mid-sized businesses over the years.

This article clearly illustrates the critical importance of balancing both elements by introducing the example of an initially successful company that focused on only one, much to its own detriment.

It’s critical that Los Angeles and Southern California CEOs and CFOs understand the difference between profits and cash flow in order to avoid making serious financial management mistakes. An outsourced CFO services provider may be able to help you in this area, as well as take steps to improve your cash flow and boost your profits.

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