Your business made a profit. So where is the cash?

Profit counts what you earned; cash counts what arrived

Profit records a sale when you invoice it and a cost when you incur it. Cash moves when the money actually changes hands. Any gap between those two moments is cash tied up somewhere.

The five usual places your cash is hiding

• Customers who have not paid yet: every unpaid invoice is profit you cannot spend
• Stock on the shelf: money paid out that comes back only when it sells
• Loan repayments: the interest is a cost, but the capital repaid never appears in profit at all
• Equipment and other purchases: paid for today, spread across years in your profit
• Tax collected for the government: it sits in your account but was never yours

A worked example

A business makes a profit of 20,000 this month. Customers still owe 35,000 of this month’s sales, it repaid 8,000 of a loan, and it bought 5,000 of stock. The bank balance fell, even though the month was profitable.

How to see it before it hurts

Look at three figures together every month: profit, the cash in the bank, and what customers owe you. Then look forward: a 13-week cash flow forecast shows the week cash runs lowest, while there is still time to chase invoices or delay a purchase.

Have it worked out on your own figures

Big4CFO checks your books to the cent and produces this every month, from your own records. One-time reports cost $49 (one month), $99 (three months) or $199 (twelve months). Monthly plans start at $349 a month (Foundational), with Growth at $599, Leverage at $899 and Capital Stack at $1,999.