News
My accounts show a profit – so where’s the cash?
19 Feb 2026
By Neil Holtschke, Director of Business Advisory
A practical guide for SME owners on why profit doesn’t equal cash — and why understanding the difference is critical for your business.
Many business owners have asked themselves the same question.
“The accounts show we have made a profit, so why doesn’t my bank balance reflect it?”
This disconnect between profit and cashflow is one of the most common and most misunderstood issues in owner managed businesses. This article explores why the two rarely match, why it matters, and what you can do to regain clarity and control.
Profit and Cash are not the same thing!
Profit is an accounting measure. It tells you what you earned. Cash however, is a liquidity measure. It tells you what you have.
They move differently because they measure different realities. Here are some of the key reasons they diverge:
- You can record income long before you get paid by your customers
If customers take 45, 60 or even 90 days to pay, your profit can increase, but the cash hasn’t physically arrived. - Stock consumes cash
When you buy stock and keep it in your warehouse, cash is leaving the business, but profit is recognised later when the stock is eventually sold. - Some cash outflows never appear in the profit figures
Certain payments don’t appear in the profit and loss account. Examples of such payments are loan repayments, directors drawings, capital expenditure and Corporation Tax. - Growth often absorbs cash before it creates it!
Growth can be cash-negative before the rewards arrive. When sales grow, cash is often used to fund things such as more stock, more staff, VAT, earlier supplier payments or fund higher debtor balances.
Why understanding the difference between profit and cash matters!
Businesses don’t usually get into trouble because they’re unprofitable. They get into trouble because they start to run out of cash.
A lack of cash clarity also affects:
• Hiring decisions
• Investment decisions
• Director drawings
• Supplier negotiations
• Ability to seize opportunities
• Resilience during slow periods
Cash isn’t just important! It’s the fuel that keeps the business running!
Regain clarity and control over your cashflow!
Many business owners don’t need a full financial review. They just need a straightforward explanation (in plain English!) of how profit became cash (or didn’t!).
Our Profit & Cashflow Clarity Snapshop is a desktop, independent review of your accounts and cash movements. No meetings, no complexity and no judgment.
You receive a concise 3-4 page report showing:
• How accounting profit converted into actual cash
• What absorbed cash (stock, debtors, creditors, capex, drawings)
• What released cash
• Why cash increased or decreased over the last 2-3 years
• Simple explanations of your debtor, creditor and stock days
You’ll know exactly:
• Where the cash has gone
• What affects liquidity
• How to make better-timed, better-informed decisions
If your accounts show a profit but the cash isn’t there, and if you’d like to regain clarity and confidence around your cashflow, contact us at hello@wrpartners.co.uk
