Not too long ago, I got a call from a client who was in full-on panic mode. “Barbara,” she said, “I don’t understand what’s going on. Our bookkeeping report shows a profit this month, but our checking account took a huge hit. How can we be profitable if our bank balance is so low?”
It’s a great question—and one I hear more often than you’d think. Thankfully, after a little digging and some clear explanations, she was smiling again by the end of our call.
Here’s what we uncovered together:
Profit and cash flow are not the same thing.
Just because your Profit & Loss (P&L) statement shows a profit doesn’t mean that money is sitting in your bank account. The P&L reflects income earned and expenses incurred on paper—not necessarily what’s actually moved through your bank account.
Big payments and timing matter.
In this case, the client had made a few large payments: payroll, insurance premiums, and a quarterly tax deposit. These didn’t all show up on the P&L for the current month (some were prepaid or spread out), but they certainly reduced the cash in the checking account.
Loan payments can be tricky.
Another culprit? A loan payment. Only the interest portion shows up on the P&L. The principal part, while a real cash outflow, doesn’t count as an expense on the income statement—so it won’t affect “profit,” but it does affect your bank balance.
Inventory and asset purchases
She’d also bought a lot of supplies and some new equipment—paid in cash—but these were being tracked on the balance sheet, not the P&L. Again, money gone from the bank, but not considered an “expense” in terms of profit.
Once we broke all of that down, she laughed and said, “I feel like I just took a mini finance course!”
That’s exactly what I love about what I do—turning confusion into clarity and helping business owners feel empowered, not overwhelmed. She walked away not only with answers, but with a better understanding of how her business works financially.
If you’ve ever asked yourself, “Where did all the money go?”—you’re not alone. Sometimes all it takes is someone to walk you through the numbers and connect the dots.
