Profit is up, bank balance is down… what gives?
You’ve had a great sales month. You’re looking at your Profit and Loss report, and it’s showing a tidy little number in bold, maybe £5,000 profit. 🎉
But then you open your banking app and… £782.35 stares back at you. 🙃
If you’ve ever muttered “Where the heck is all my money going?” this one’s for you.
You’re not imagining it. You can absolutely be making a profit but have no cash. Let’s unravel why it happens, and most importantly, what to do about it.
💸 First up… what’s the difference between profit and cash?
Here’s the simplest way to explain it:
Profit = What’s left after your income minus your expenses (on paper)
Cash = The actual money in your bank account right now
They’re related, but they’re not twins. More like distant cousins who don’t always talk to each other.
Your profit can look fantastic, while your bank balance looks… concerning. And that’s because of timing, accounting methods, and money movement behind the scenes.
🧠 6 reasons you’re making a profit but have no cash
1. Your customers haven’t paid you yet
This is the big one. You’ve done the work, sent the invoice, and counted it as income, but the money isn’t in your account yet.
This means your accounts show profit (because that sale is recorded), but your cash hasn’t moved.
🙋 Real example: A web designer invoices £4,000 for a project in July with 30-day terms. Her accounts show the income in July, but the cash doesn’t arrive until August.
Quick fix:
Tighten your payment terms (e.g. 7 or 14 days instead of 30). Better still, due on receipt. Collect payment via GoCardless
Use tools that automatically chase invoices
Add a payment link to your invoice to speed things up
2. You’ve bought stock or assets
If you’ve bought things for your business like stock, equipment, or even a laptop, that money goes out of your bank account. But it might not show as a full expense on your profit report yet (especially if it’s treated as a capital asset).
This creates a temporary mismatch between what you’ve “spent” and what your profit report reflects.
Quick fix:
Keep a separate list of large purchases
Factor these into your cash flow forecast, even if they don’t show up in profit
3. You’re repaying loans or paying off debt
Repaying a business loan, credit card, or even a bounce-back loan doesn’t affect your profit (because it’s considered paying back money you borrowed, not a business expense).
But it definitely affects your cash flow.
Quick fix:
Include loan repayments in your monthly cash plan
Consider setting up a separate pot to squirrel away loan payments as money comes in
4. You’ve withdrawn money (drawings or dividends)
If you’re a sole trader and you’ve taken drawings, or a director taking dividends, these don’t appear on your P&L., but they still leave your account, and your cash drops accordingly.
Even if you’re “paying yourself,” the business still sees it as money going out, just not recorded as an expense in your profit report.
Quick fix:
Pay yourself a regular, manageable amount
Review your drawings/dividends each quarter and adjust if needed
Ask your Bookkeeper to show you total personal withdrawals alongside your profit
5. You’ve got a tax bill due, and forgot to plan for it.
This one’s a heart-sinker. Your profit looks great. Business feels healthy. And then your Accountant gently drops the news:
“Your Corporation Tax bill is due next month, and it’s £6,000.”
Tax is a profit-based cost, but it doesn’t get deducted from your P&L until it’s paid, and it’s easy to forget to ringfence that money.
Quick fix:
Use a separate bank account to save for tax every single month
As a rule of thumb, set aside 20–25% of your profit if you’re limited, or 30% if you’re self-employed
6. You’re growing, and growth eats cash
Ironically, rapid growth often puts a strain on cash flow.
You might be:
Hiring a team before the revenue is consistent
Paying for stock, supplies or tools upfront
Spending on ads and marketing ahead of the return
You are profitable, but your money’s constantly tied up in the next thing. That’s normal, but it needs to be managed carefully.
Quick fix:
Track your burn rate (how much cash you’re using per month)
Get help creating a 3-month and 12-month cash flow forecast
Build a buffer even £1,000 makes a difference
📊 What can I do to avoid the cash trap?
Here’s what we recommend to every client:
✅ 1. Use cloud software to track both profit and cash
Xero, FreeAgent and QuickBooks make this easy. Keep an eye on your cash flow report, not just your P&L.
✅ 2. Create a simple cash flow forecast
This is your magic money map. We can build you one that shows:
What’s coming in
What’s going out
When you’re likely to have a cash gap (so you can do something before it happens)
✅ 3. Check your cash monthly (or even weekly)
Make reviewing your bank balance and upcoming expenses part of your routine. Pair it with a cuppa and 10 quiet minutes, and it can change everything.
✨ Want help matching your profit to your cash?
We work with growing service-based businesses that are profitable on paper but constantly feel cash-poor. You’re not alone, and you’re not doing anything wrong; you just need the right systems and visibility.
Book a free call and we’ll help you build a setup where cash and confidence can grow side-by-side.
