You can show a net profit and still have a cash flow problem.

You can have a lot of money being posted on your balance sheet…you are growing, you are making sales, business is humming. To support your growth, you find that you are also growing your debt. Your balance sheet doesn’t affect net profit and by focusing on profits, we can lose sight of debt. Debt servicing can cause you to have a cash flow problem.

It’s good to pay attention to growth and profits. It’s also important to pay attention to your debt and debt servicing requirements. Monitor both your income statement and balance sheet.