Four Civitas Experts Explain Why Profit Is Not Cash And How Founders Can Protect Business Liquidity

Here, four experts from the Civitas community share their insights into how to keep your business running smoothly without running out of money.

Linda RossouwMo KajeeStephane StreudersJonathan Fouche

Understanding the core principles of cash flow

A common trap for many founders is mixing up profit and cash. A company can look incredibly healthy on its monthly management accounts while actually sliding into a major liquidity crisis.

"Profit is not cash; it's not the same thing," warns Jonathan Fouché, director at Key Account Connections. "We get a lot of founders and small businesses who challenge the profit figure when you look at the profit on their profit and loss statement because it doesn’t match what their cash bank balance is. There is very much a disconnect between what founders understand as cash and profit."

Fractional CFO Linda Rossouw of LaRoss Consulting agrees, pointing out that a business can look highly successful on paper but still fail if customers pay late or if too much money is tied up in stock. She recommends staying on the front foot by using a rolling 13-week cash flow forecast to spot potential emergencies well before they happen.

Mohamed Kajee, fractional CFO at Thrive adds that tracking your numbers means looking through the windscreen rather than the rearview mirror. "Normally, accountants and finance people look at the profit and loss statement, which looks backwards," Kajee says. "It is super important to rather focus on the cash flow statement because it's a forward-looking metric. It shows you where your business is going as opposed to looking at where it has been."

Crucially, cash flow isn't just something to dump on the finance team. It requires everyone in the business to take responsibility.

"Sometimes people look at cash flow and think it's only a finance department responsibility," says Kajee. "From my point of view, it's everybody in the business's responsibility. Operations makes decisions regarding how to serve customers that have a cost impact, and commercial teams make pricing decisions that affect cash flow. Finance is the custodian, but the whole business contributes towards it."

Funding working capital and navigating debt

Rapid growth naturally eats up cash because you have to cover expenses like stock, payroll, and overheads long before the customer's payment actually lands.

"Growth eats up cash in most businesses," notes Stephane Streuders, director at Key Account Connections. "When the business is doing well, your cash may be under more pressure than when the business potentially isn't doing well. Every phase has its cash flow specific challenges."

When you hit these funding gaps, you need to be smart about how you bridge them. Taking on short-term debt or invoice discounting can work brilliantly, but only if the actual business model makes sense.

"Don't fund short-term cash needs with long-term cash funding," Fouche advises. "Longer-term funding should be funded with either equity or long-term debt. If your company's growth stopped tomorrow, would you be able to pay off the facility from how you're currently operating? If the answer is no, then you shouldn't be funding those costs through that facility."

Kajee suggests weighing up debt based on risk and predictability. "If a business is faced with a specific project and you can quantify the variables around it - like timing, risk, or the likelihood of success - then you can derisk it," he says. "If you can understand the variables, you should definitely look at debt financing because you know what the cost of finance will be. But if it's a structural problem within your entire business, you should not look at debt to try and solve that. You just can't optimise your way out of a broken business model."

Handling corporate payment terms and pricing pressures

Landing a massive corporate client feels like a massive win, but it usually comes with the painful reality of 60, 90, or even 120-day payment terms. Founders need to manage this tension carefully so a dream contract doesn't end up sinking the business.

"You shouldn't build a company on one client or one opportunity," warns Streuders. "An opportunity like that should make your company stronger, not more vulnerable. Build a little bit of fat into the pricing so that if you are awarded a contract, you know you can afford to service the client. It’s difficult to amend your pricing once contracts have been signed."

A bit of outside-the-box negotiation can also help ease the pressure. Streuders suggests chatting to clients about milestone billing rather than waiting until the end of a project to invoice. Fouche points out that taking a slightly lower margin for faster payment is often a much healthier trade-off.

"Sometimes having a 20% margin that's paid within 20 to 30 days is a lot better than having a 30% margin paid within 90 days, because the cost of funding that gap is quite expensive," says Fouche. "Look at whether you can negotiate with your client so that your margin can be a bit less to ensure they pay sooner."

Debunking the growth myths

The ultimate trap for high-growth businesses is assuming that rising turnover cures all financial headaches.

"The idea that revenue solves everything is a myth," says Fouche. "We see a lot of discussion and almost unspoken competition between founders based around revenue. But at the end of the day, revenue means nothing if the profit is not there and if your cash collection is not there."

Streuders agrees, urging entrepreneurs to know when to say no. "There's some security in showing restraint when it comes to walking away from a sale or a type of client," she says. "If you're just constantly chasing those revenue figures, you will inevitably make a bad decision if you're not looking at margins and actual cash in the bank."

At the same time, while reckless growth is dangerous, hoarding stagnant cash isn't the answer either. Kajee advises that if you do have surplus cash, you need to make it work for you.

"Risk-averse founders often want to preserve cash at all costs and have a large amount of cash sitting in the bank," Kajee notes. "It shouldn't just sit there. You should make sure your cash is working for you, whether that means getting a bulk stock discount from a supplier, securing early payment discounts, or putting your liquidity into a short-term facility where it can earn a proper return."

Keep the wheels turning

Managing cash flow through a high-growth phase comes down to balance. It requires keeping a tight grip on margins, forecasting with foresight, and ensuring that every department understands its financial impact. Growth is the goal, but cash is the fuel that gets you there. By treating liquidity as a strategic operational tool rather than a purely financial scorecard, founders can confidently scale their businesses without running out of runway.