Revenue, profit, cash: not the same thing

Lesson 1 of 13 in our free Business Money Basics guide: a 5-minute money game with the key points below.

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This lesson is a 5-minute game. Free, no sign-up needed.

The story so far

Mo: I sold £600 of cakes at the Saturday market. I'm basically a CEO now. I've ordered business cards.
Nana: Lovely. And what did the ingredients, the stall and the business cards cost you?
Mo: …why would you ask me that in front of my cakes.
Chip: Three different numbers! Revenue = money from sales. Profit = revenue minus costs. Cash = what's actually in the bank right now.
Chip: Revenue is the applause. Profit is the bit you keep. Cash is the bit you can spend today. Track all three.

Mo's month: £1,200 of sales, £850 of costs, and £300 of it not yet paid by a cafe. What's the profit?

£350. £1,200 − £850 = £350. The unpaid £300 still counts as a sale; it just isn't cash yet.

Total sales at the market: £600 → Revenue. Revenue (or turnover) is everything customers paid, before any costs.
£600 sales minus £250 of costs → Profit. Profit is what's left after costs. Here, £350.
The balance in Mo's business account this morning → Cash. Cash is what you can actually spend today.
A cafe owes Mo £300 for an order, payable next month → Revenue. It counts as a sale (revenue) now, but it isn't cash until they pay.
What's left of the year's sales after every cost is paid → Profit. That's profit: the scoreboard for whether the business makes money.
Fact: “A business can be making a profit and still run out of cash.” — If customers pay late and bills are due now, the bank account can hit zero. More on this later.
Myth: “Big revenue means a business is doing well.” — Revenue says nothing about costs. Plenty of businesses sell loads and still lose money.
Myth: “Profit and cash in the bank are always the same number.” — Timing gets in the way: unpaid invoices, stock bought upfront, tax bills saved for later.