"The P&L says we made $8,000 last month. So why is the account overdrawn?" This is one of the most common questions in small business, and both numbers are correct. Profit and cash are two different stories about the same month.
Where the cash goes that profit can’t see
The P&L measures what you earned. The bank measures what you collected and spent. The gap hides in a few predictable places:
Run those in reverse and you get the opposite illusion: a "bad" month on paper while the account grows, because old invoices finally paid. Neither report lies. They answer different questions.
A ten-minute weekly cash routine
- Check the balance, and subtract what’s already spoken for: upcoming payroll, rent, money already set aside.
- Scan who owes you. Anything over 30 days old gets a friendly nudge this week, not next month.
- Look two weeks ahead. Big outflows coming? Know before they land.
Four fixes if cash is chronically tight
- Invoice faster. The day the work finishes, not the end of the month. Deposits up front for big projects.
- Make paying you easy, online payment on every invoice, automatic reminders. Then actually follow up: the aging report is a to-do list, not wallpaper.
- Spread the spikes. Ask for monthly billing on annual bills, or set aside for them monthly so no single month takes the hit.
- Build a floor. A cash buffer of one to two months of expenses turns most emergencies back into inconveniences.
If you regularly can’t tell whether you can afford something, that’s not a math problem, it’s a reporting problem. A P&L, a balance sheet, and a simple cash view together answer it in about ninety seconds.
This guide is general information for small business owners. It is not tax, legal or accounting advice for your situation. Talk to your CPA before acting on anything tax related. JMH keeps books and does no tax work.
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