Your business can make a profit but still not have enough cash on hand if you don’t collect payment at the time of service. At one given time, you may not have enough cash to pay your bills or payroll, Collecting payment at the time of service will ensure that you have enough cash coming in when you need to pay cash out.
The best example is hospitals. These days, insured patients are no longer allowed to walk out of the hospital without paying because of high administrative costs and low collection rates.