£150k profit…but only £50k in the bank?!
You check your accounts, and they say you’ve made £150,000 profit 🎉
You check your bank, and there’s £50,000 sat there 🤔
So where’s the other £100k gone?!
This is one of the biggest causes of confusion (and stress) for business owners.
Because profit and cash are NOT the same thing.
Here’s what’s really going on…
Your profit is based on accounting rules.
Your bank balance is based on… well… reality.
And the gap between the two usually comes down to things like:
👉🏼 Money you’ve earned but not been paid yet
Your accounts include it, your bank doesn’t!
👉🏼 Loan repayments
They reduce your cash, but don’t reduce your profit.
👉🏼 Buying equipment or assets
You’ve spent the cash, but the cost is spread over time in your accounts.
👉🏼 Stock sitting on your shelves
You’ve paid for it, but it’s not counted as a cost until it’s sold.
👉🏼 VAT and tax
That money was never really yours, it’s just passing through your bank account.
Why this matters…
You can still be profitable on paper and still run out of cash 😬
And that’s when businesses get into trouble.
Suzie Says 💁🏻♀️
Don’t just look at your profit and think you’re smashing it.
You need to understand:
What cash is coming in
What’s going out
And when? (Timing is so important)
Because cash is what keeps the doors open.