It’s 6:40am. You’re in the ute between jobs, coffee cooling on the dash, and the month’s P&L looks fine — better than fine. Revenue is up. There’s a healthy profit line. Then you open the bank app and the available balance doesn’t match the story the report just told you.
If that gap feels familiar, you’re not doing the books wrong. You’re looking at two different questions.
Profit asks: did this period’s work create a surplus on paper? Cash asks: is there money in the account I can actually spend, pay staff with, or draw?
Your profit and loss statement is accrual by design. It recognises work when it’s earned and costs when they’re incurred — not always when money moves. Your bank balance only cares about cleared cash.
Both matter. They just don’t move in lockstep. When owners treat “profitable” as “we’re fine to hire / buy / draw,” the bank account is often the first place that assumption breaks.
Picture a plumbing business with four crews. In one month you invoice $180k of completed jobs. Cost of labour, materials, and overheads leave you with a solid profit — say $28k on the P&L.
But $62k of those invoices are still sitting with customers at month-end. You’ve already paid wages, suppliers, and the fuel card. The profit is real on the report. The cash hasn’t fully landed yet.
That’s the simple version of the mismatch: timing. Work done and recognised now; money arriving later. Add GST remittances, PAYG instalments, super, loan principal, and a plant upgrade you paid for in cash, and a “good” month can still feel tight by Friday.
None of that means the profit figure is fake. It means profit alone is a poor proxy for “can we afford the next decision.”
When owners ask me where the money went in a profitable month, I usually walk the same short list — not as a lecture, more as a torch.
Debtors. Work billed, not yet paid. If your average collection stretch is around 45–60 days, a big month of invoicing can look brilliant on profit and quiet in the bank for weeks. A pattern I see often: $48k sitting past 30 days while the crew schedule is already booked solid for next month.
Work in progress (WIP). Jobs started, costs outlaid, invoice not issued yet. Materials on the van and hours on the timesheet can chew cash before the customer sees a bill.
GST, PAYG, and super. These are timing obligations. Profit treats many of them differently to the way cash leaves the account when remittances fall due. The P&L can look calm in a month where a larger remittance is about to clear.
Loan principal. Interest may hit the P&L; principal repayments usually hit cash only. A $4,200 monthly principal slice doesn’t reduce profit the way owners sometimes expect — but it definitely reduces what’s left to spend.
Capex. A $22k ute deposit or a new compressor is often a balance-sheet move, not a full P&L expense in the month you pay. Profit barely flinches. The bank account does.
Drawings / dividends. Taking money out for living costs or tax isn’t “an expense” in the same way wages are. It can be entirely reasonable — and still the reason the account feels short after a profitable month.
One simple illustrative walk-through
Say the month shows $28k profit. Then:
You don’t need every line to fire at once. Two or three of them in the same month is enough for the bank to disagree with the P&L. The arithmetic isn’t exotic — it’s just rarely lined up on one page for an owner who’s already late for the next job.
Growth often makes the mismatch louder, not quieter.
More crews means more wages paid weekly while bigger invoices sit longer with commercial customers. More jobs mean more materials bought before you bill. A bigger month can lift profit and still increase the cash you need to fund debtors and WIP.
I’ve watched owners celebrate a record revenue month, approve the next hire on the strength of the P&L, then discover the bank needed another $30–40k of working capital to carry the growth for 60 days. The hire wasn’t wrong. The funding of the gap hadn’t been looked at.
If you’re between about $1M and $10M with a team to pay, growth is usually a cash question first and a profit question second. Profit tells you the model can work. Cash tells you whether this month’s version of the model fits in the account.
Before the next hire, buy, or draw, I want owners looking at a short checklist — calm, concrete, no drama:
You’re not aiming for a textbook model. You’re aiming for one clear answer: do we have the cash to fund this decision, or do we need to collect, bill, delay, or fund the gap first?
If your P&L and your bank account have been telling different stories, that’s useful information — not a personal failing. Most growth-stage owners I work with don’t need more reports. They need a clearer read on where the cash is sitting before the next call.
If you want a second set of eyes on that gap for your business, get in touch with me at Full Cycle Accounting and we can walk the numbers together.
This is general information only and doesn't take into account your objectives, financial situation or needs. Before acting on it, consider whether it's appropriate for you — or talk to me about your situation.
Is profit wrong if the bank is short?
Usually no. Profit and cash measure different things. Short cash with solid profit almost always points to timing, debtors, WIP, tax remittances, principal, capex, or drawings.
Should I stop growing until cash catches up?
Not automatically. Growth often needs more working capital. The question is whether you’ve funded the gap — through collections, billing discipline, timing of spends, or other funding — before you lock in the next fixed cost.
What’s the fastest useful check this week?
Debtors ageing + next 60 days of remittances/repayments + any unbilled WIP. That trio explains a surprising share of “profitable but tight” months.
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