The famous catchphrase from the movie Jerry Maguire is a question that many small business owners can find themselves shouting.
They look at the financial statements and see they made a profit, but when they look at the bank account there isn’t any money to show for it.
So what’s going wrong?
There are a few scenarios that might be playing out in your business:
- You are repaying a loan
- Your tax payments are removing cash from your bank
- Prepayments of insurance
- You purchased new equipment for the business
- You might be taking or loaning money to yourself or others outside of payroll wages.
Another factor might also be that you’re undertaking an accrual method of accounting. This could mean that you are providing $20,000 in services to your clients in February, but you don’t invoice until March and then they have 30 days to pay. This could result in a profit being reported in No Profit for February and a large profit for March but no cash in the bank until April or May.
So how can you manage your finances more efficiently?
By understanding that not only do you need to have a Profit each month but that you also need to have and Operating Cash Flow Profit.
Ensure that you invoice as soon as possible to get that Cashflow in the door and understand that Loans and Tax Payments are not reflected in your standard Profit and Loss.
Love Miss EBS xx
If you want to make sure a profit translates into money in the bank, please get in touch today to discuss your situation further.
- Posted by admin
- On March 30, 2016
- 0 Comments