Profit and cash measure different things.
Your P&L records a sale when you invoice, not when the customer pays. It records a purchase when it's consumed, not when you paid for the stock. And it spreads the cost of a machine over years, even though the cash left in one go.
So a business can report healthy profit while its bank balance shrinks. The gap is almost always explained by a handful of places where cash gets stuck.
Where cash usually gets stuck.
Receivables
Sales are growing, but customers are paying more slowly. Every extra day of credit is cash you've earned but can't use.
Inventory
Stock bought ahead of sales, slow-moving items, or buffer stock that has quietly grown.
Supplier terms
You pay suppliers faster than customers pay you, so growth widens the gap.
Capital spending
Machinery, fit-outs or new locations paid from operating cash instead of planned funding.
Loan repayments
Principal repayments reduce cash but never appear in the P&L.
Growth itself
Faster growth needs more working capital. Profitable growth can still consume cash.
Five numbers to check this month.
- Receivable daysAre they rising?
- Inventory daysIs stock growing faster than sales?
- Payable daysAre you paying faster than you collect?
- Operating cash flowProfit adjusted for working capital.
- Cash forecastThe next 13 weeks, not just last month.
Is cash tighter than your profit suggests?
Tell us what's happening in your business. We'll help you see what the numbers mean.