In financial management, cash flow and profit are often confused—but they measure two very different things. Understanding the difference is essential for making sound business and property decisions.

What is Profit?

Profit is what’s left over after all expenses are deducted from income. It’s what you see on your income statement and is often referred to as net income.

There are three common types:

• Gross profit – Revenue minus direct costs (like materials or contractor labor)

• Operating profit – Gross profit minus operating expenses (like salaries or utilities)

• Net profit – The “bottom line” after all costs, taxes, and interest are subtracted

Profit tells you if your business is financially successful on paper.

What is Cash Flow?

Cash flow tracks the actual movement of money in and out of your accounts. It includes all income and expenses—whether or not they’re shown on the profit and loss report.

There are three types of cash flow:

• Operating cash flow – From day-to-day activities like rent collection and paying bills

• Investing cash flow – From asset purchases or sales (like buying new appliances)

• Financing cash flow – From loans, repayments, or owner contributions

Cash flow shows if you can pay your bills, vendors, and payroll right now.

Why the Difference Matters

A property can be profitable but still have cash flow issues—especially if tenants are behind on rent or large bills come due all at once. On the flip side, a property may have good cash flow short-term, but poor long-term profitability if expenses are too high.

In short:

• Profit is a measure of performance

• Cash flow is a measure of financial health and sustainability

Both are important, and understanding the difference helps you make better decisions, spot red flags early, and plan for the future with confidence.