Why cash is king is more than a saying – it is a survival rule for small businesses. While sales and profits can look great on paper, it is your cash – the money actually in your business bank account – that determines whether your business will thrive or struggle.
What is Cash Flow and Why Cash is King?
Cash flow is the movement of money in and out of your business. It is not the same as profit. Instead, it tracks the actual cash that enters your business from income (like customer payments or rental income) and exits through expenses (like rent, wages, tax bills, or loan repayments).
Positive cash flow means your business has more cash coming in than going out. Negative cash flow, on the other hand, means your business is spending more cash than it is receiving – and that is where trouble begins. This is why cash is king for small businesses—it directly affects your ability to operate daily.
Why Cash Flow Matters More Than Profit
You can be profitable and still run out of cash. For example, if your customers take 90 days to pay you, but you must pay your suppliers and staff every month, your business could face a cash shortage – even if you are technically making a profit.
This is especially dangerous for small businesses, where reserves may be low and access to credit limited. Without enough cash, you could miss payroll, default on rent, or be unable to fulfil orders – putting your business at risk of closure.
Real-Life Example: Why Cash is King Even in Profit
Imagine a small retailer in Wimbledon that has £10,000 in sales this month with a 30% profit margin – so £3,000 profit. However, if only £2,000 of those sales have actually been paid, but the business needs £4,000 to cover bills, it is in negative cash flow. Despite being profitable, the business is now under pressure.
This scenario is common – and it highlights the importance of managing cash, not just focusing on profits. It is another reason why cash is king.
Five Reasons Why Cash is King Matters to Small Businesses
- You Need Cash to Pay Bills – Rent, staff, suppliers and tax all require cash, not promises.
- Cash Flow Shows Business Health – Positive cash flow is a sign of sustainability.
- Cash Keeps You in Control – Knowing your cash position helps you make better decisions, like when to invest or cut costs.
- Cash Gives You Breathing Room – Emergencies happen. Cash provides a buffer.
- Cash Flow Helps You Grow – Want to hire, expand, or buy equipment? You will need cash to do it.
How to Take Control of Your Cash Flow
- Create a cash flow forecast – Know what cash is coming in and going out over the next 3–6 months.
- Send invoices promptly – And follow up late payments.
- Set aside for taxes – Avoid surprises by putting money aside each month.
- Use accounting software – Tools like Xero or QuickBooks can help track cash flow in real time.
We Can Help You Manage Your Cash Flow
At Southside Accountants, we support small businesses, landlords, limited companies, sole traders, partnerships, and individuals across Wimbledon, surrounding areas and nationwide. We help you stay on top of your cash, understand your financial position, and make smart, sustainable decisions for your future.
Final Thought: Why Cash is King
You would not drive a car without checking the fuel gauge – so do not run your business without knowing your cash position. Understanding and managing your cash flow is not just good practice – it could be the difference between thriving and surviving. That is why cash is king.
Further reading:
Start New Financial Year 2025 Tax Tips – Save More This Year |
Small Business Tax Efficiency in Wimbledon
Need help managing your business cash flow? Contact Southside Accountants Wimbledon today for expert support and personalised advice.
