We are profitable but cash is always tight
The accounts say the business works. The bank balance disagrees.
Founder & writer — writes from experience
Profit and cash separate because of timing: invoices unpaid, stock bought early, tax accrued, and money already drawn.
Find the gap by looking at debtor days, drawings and the tax reserve before assuming a pricing problem.
What to fix first
- 1
Measure debtor days
The average time between invoicing and being paid.
- 2
Check owner drawings against profit
Drawing ahead of profit is a common quiet cause.
- 3
Confirm the tax reserve is real
Unreserved tax makes a healthy balance an illusion.
Your seven-day plan
Day 1
Confirm the cash date
Write the actual bank balance and the date/time it represents before analysing the accounts.
Day 2
List money owed to you
Break invoices into current, due and overdue amounts with realistic collection dates.
Day 3
List money you owe
Record suppliers, payroll, tax, loan repayments and other commitments by the date cash leaves.
Day 4
Reconcile the gap
Identify the timing items that convert accounting profit into the current cash position.
Day 5
Build the thirteen-week view
Use expected receipts, essential costs and one downside case to find the lowest cash point.
Day 6
Choose immediate actions
Prioritise invoice collection, deposits, cost timing and creditor conversations that improve the actual gap.
Day 7
Set red-line triggers
Write the cash-floor, overdue-invoice and payment triggers that mean you must seek help or pause spending.
Numbers and documents to collect
- Bank balance and statements
- They establish the cash position that needs explaining.
- Receivables and payables ageing
- They reveal whether customer and supplier timing drives the shortfall.
- Tax and debt schedule
- They surface claims on cash that a profit figure may not show.
Profit does not pay next week’s bills
A company reports a profit for the month but has a large invoice unpaid, a VAT payment due and stock already paid for. The reconciliation shows why the bank balance is tight even though the business model may be profitable.
The right response is a short-term cash plan and investigation of the timing causes, not a generic attempt to sell more or take on more debt.
Common mistakes and red flags
- Payroll, tax or essential supplier payments have no dated cash source.
- Overdue customer cash is treated as certain without evidence.
- The forecast becomes positive only by assuming new borrowing.
Get professional help now if…
Read these, in this order
When this path is not the right one
- Borrowing to fill a timing gap you have not diagnosed usually repeats the problem three months later.