Cash Flow vs Profit: Understanding the Difference and Why It Matters

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Cash Flow vs Profit: Understanding the Difference and Why It Matters

Updated 17/07/2025

Part 6: How to Track Cash Flow and Profit

Even if you're not a numbers person, tracking your cash flow and profit doesn’t have to be complicated — especially with today’s cloud tools and support from your accountant.

🧰 Tools to Track Cash Flow and Profit

Here are some of the most popular and user-friendly options available in the UK:

✅ Xero

  • Cloud-based accounting platform

  • Live bank feeds, invoicing, VAT returns

  • Great for small-to-medium businesses

  • Integrates with cash flow tools like Float

✅ QuickBooks Online

  • Easy setup for sole traders and limited companies

  • Real-time profit and loss reports

  • Track invoices, expenses, VAT

✅ FreeAgent

  • Ideal for freelancers and contractors

  • Friendly interface, UK-tax focused

  • Shows profit, cash flow, and tax timeline

✅ Float

  • Specialist cash flow forecasting tool

  • Integrates with Xero, QuickBooks, FreeAgent

  • Visual, intuitive dashboard of future cash trends

Frequency Cash Flow Tasks Profit Tasks
Daily Check bank balance, incoming payments —
Weekly Review invoices due, update expenses Track sales and costs
Monthly Reconcile bank, generate cash flow report Run profit & loss (P&L) statement
Quarterly VAT review, seasonal adjustments Management accounts, trend analysis
Year-End Final cash flow & tax planning Final profit analysis, Corporation Tax return

🔍 Example: Simple 3-Step Monthly Routine

  1. Reconcile your bank (automatically in most apps)

  2. Run a profit & loss report

  3. Compare it to cash on hand
    → Are you cash rich but unprofitable?
    → Are you profitable but cash poor?

💡 Tips to Stay in Control

  • Use cloud software: No more spreadsheets, no more guesswork

  • Set up invoice reminders: Automated chasers mean faster payments

  • Tag income/expenses consistently: So reports stay accurate

  • Ask your accountant for dashboards: They can provide monthly reports via email or login portals

👥 Work With Your Accountant

The best accountants:

  • Help you set up reports and dashboards

  • Show you trends and problem areas

  • Review reports with you regularly

  • Translate numbers into actionable advice