"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, tax set-asides.
- 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 — not tax, legal, or accounting advice for your specific situation. Talk to your CPA, or to us, before acting on it.
← All resources