Your profit-and-loss statement says you made $40,000 last quarter. Your bank account disagrees. Both can be right at the same time — here is why.
Profit is a story; cash is a fact
Profit counts invoices you have sent, even if nobody has paid them yet. Cash counts money that actually arrived. A growing business can be profitable on paper while its bank balance shrinks, because every new project soaks up cash before it pays out.
The three places cash hides
Unpaid invoices are the obvious one. The sneaky ones are inventory sitting on shelves and loan repayments, which reduce cash without reducing profit. When clients tell us money feels tight despite good sales, one of these three is almost always the culprit.
A simple monthly check
Compare three numbers on the first of each month: revenue invoiced, cash received, and cash in the bank. If invoiced is climbing but received is flat, chase invoices. If both climb but the bank balance does not, look at spending and debt payments.
Profit tells you the business model works. Cash tells you the business survives. Watch both, and you will never be surprised by either.
