“Cash is king.”
 It’s one of the most repeated phrases in the world of business finance—and yes, there’s truth in it. But here’s the part most people miss:

Only good cash is king.

As accountants, we often see businesses proudly showing off healthy bank balances while ignoring the more critical issue: profitability. Let’s break this down, especially for small business owners who are navigating the tricky world of cash flow, profit, and long-term financial health.

What Is “Good” Cash?

Good cash is cash that your business generates from making a profit. It’s sustainable. It’s earned. It’s repeatable.

Just because you have money in the bank doesn’t mean your business is financially healthy. In fact, cash in the bank can be misleading if you’re not generating profits behind the scenes.

Where Can “Bad” Cash Come From?

Here are some common (and often dangerous) sources of cash that don’t reflect business profitability:

• Investor funds (they’ll expect returns)
• Delaying supplier payments (hurts relationships and may incur penalties)
• Mounting HMRC or tax debt (a ticking time bomb)
• Customer deposits (can create false confidence)
• Borrowing from friends or family (mixing money and relationships is risky)
• Not paying yourself (your business isn’t a charity)

While these sources can be essential in the short term, they aren’t a substitute for sustainable growth.

Profit Must Drive Cash Flow

Without profit, your business becomes dependent on debt, investor cash, or cost-cutting. That’s a dangerous game to play. Over time, it can lead to a cycle of borrowing—robbing Peter to pay Paul—which eventually collapses under the weight of mounting obligations.

Here’s the brutal truth:
Without profits, your only way to raise cash is through debt or external investment.

And for most business owners, more debt = more stress and sleepless nights.

Why Monitoring Profit Is Critical

You can’t measure profit by looking at your bank balance. Profitability is a deeper, more strategic number that takes into account revenues, costs, expenses, and timing.This is why small business accounting needs to go beyond just checking your cash flow or reconciling your bank account.

An accountant can help you understand:

• True profitability over time
• Where you’re leaking money
• How to use financial reports to make smart business decisions
• Whether your pricing and costs support long-term growth

Final Thought: Focus on Profit to Build a Resilient Business

Yes, cash is crucial. No cash, no business. But for long-term success, you must create cash through profit, not by stacking up debt or delaying payments.

This advice isn’t for high-profile startups burning millions in VC money. It’s for your everyday, hardworking small business owner—the Joe Bloggs of the world—who’s trying to build a reliable, profitable business that supports their lifestyle.

Want peace of mind, financial control, and long-term success?

Focus on generating profits. That’s the real king.

Tired of guessing where your money’s really coming from?
Let’s make sure your cash is backed by real profit.

Book a quick call with Adaptive Accountancy today.