The question "if I've made £100k of profit why don't I have that amount of cash in my bank account" comes up a lot. People are often confused why the two are different but it's important to understand what uses cash up and why you can't assume you'll have the same amount sat ready to spend so you can manage your business properly.
There are lots of reasons why profit is not the same as cash and usually it's these kind of things 👇
➖ you've raised your invoices but customers haven't paid you yet
➖ you are making loan repayments for older debts
➖ you're drawing money out of the business outside of your payroll amount
➖ you've just paid your corporation tax for the year / or quarterly VAT bill
For example, you can have a great month on paper but if a large customer suddenly has cashflow issues and delays paying you for a few months you'll feel your own cash position get tighter, even though you're profitable.
Understanding your profit & loss and cash position gives you clarity on how your business is actually performing. There's no shame in not understanding the figures, you just need to ask the right person to explain it to you
If you want to understand your number more then contact us and arrange a callback. We'll be happy to speak with you to find out more about how we can help you feel more in control of your business .
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