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Cashflow & Working CapitalVideo
Why Profitable Businesses Still Go Bankrupt
Profit doesn't guarantee survival. Most businesses fail because cashflow breaks first. This article explains the working capital trap.
10 January 20256 min readBy CA Rakesh Kumar
The Profit vs Cashflow Trap
Many founders celebrate profit but ignore cashflow. Here's the reality:
Profit is an accounting concept. Cash is survival.
The Working Capital Trap
Your business shows profit but:
- Receivables are piling up (60-90 days)
- Inventory is stuck (slow-moving items)
- Vendors want payment (30 days)
- GST and salaries are due (every month)
Result: Profitable on paper, broke in reality.
Warning Signs
- Bank balance is always low despite good sales
- You're constantly chasing collections
- GST payment creates monthly stress
- You can't take advantage of supplier discounts
What To Do
1. Track 13-week rolling cashflow
2. Age your receivables weekly
3. Set collection targets for sales team
4. Review inventory ageing monthly
5. Negotiate better vendor terms
Need help fixing cashflow? Book a strategy call.
Written by
CA Rakesh Kumar
Simplix Advisory