Profit and cash measure different things. Profit counts a sale when you make it and a cost when you incur it. Cash counts both when the money moves. In a steady business they end up close. In a growing business, a seasonal one, or one that invoices, they can be far apart for months.
Where the cash goes
1. Customers who have not paid yet
Every invoice not yet paid is profit you have booked and cash you do not have. If you invoice $50,000 a month and customers take 45 days to pay, about $75,000 of your money is always out. If they slip to 60 days, another $25,000 leaves your account and never comes back while the delay lasts. Measure it with debtor days: what you are owed divided by annual sales, times 365. See customers who owe you money.
2. Stock bought ahead of sales
Buying a pallet to get a better price, stocking up before a busy season, materials for jobs not yet started. The cost leaves the bank now; the profit arrives when it sells. Compare stock on hand with what you use in a month: more than two or three months’ worth is cash on the shelf.
3. Loan principal
Only the interest on a loan is an expense in your profit. The principal you repay comes out of cash that the profit figure says you still have. A $2,000 monthly repayment that is mostly principal can take $20,000 a year out of a business that “made” $20,000.
4. Equipment and fit-out bought outright
A $30,000 van shows up in your profit as a few thousand dollars of depreciation a year, and in your bank as $30,000 on one day.
5. Tax and GST timing
GST collected is not yours. A business that spends it before the BAS is due, then pays it from next quarter’s takings, is always a quarter behind. The same happens with income tax instalments after a good year.
6. Owner drawings
For a sole trader or partnership, what the owner takes out is not an expense in the profit at all. If drawings run above profit, the account falls every month while the accounts show a healthy business.
See where your business sits, from your bank statement
Upload a CSV or PDF of your business bank account (3 to 12 months). The health check rebuilds what you really earn, compares each cost with businesses like yours, and shows where money is leaking and who owes you. Free to run: you see how much is at stake before you pay anything.
Any bank, any currency. The file is read once and not kept. Full report from $149.
How to see it in your own numbers
Take twelve months of bank statements and sort every line into one of three buckets:
- Trading: customer receipts, supplier and wage payments, rent, running costs.
- Financing: loan money in, loan repayments, owner money in and out.
- Investing: equipment, vehicles, fit-out.
If trading cash is positive but the total is negative, the business works and the cash is going to loans, drawings or equipment. If trading cash itself is negative while the accounts show a profit, look at debtors and stock first. The break-even guide shows how much you need to sell for trading cash to cover the rest.
What to do first
- Chase every invoice over 30 days and change your terms on new work: deposits up front for jobs, payment on completion, card on file.
- Set aside GST and tax in a separate account each week.
- Match drawings to what the business actually makes, measured over a year.
- Stop buying stock more than two months ahead unless the discount beats what the cash costs you.