This is one of the more frustrating moments in business. On paper, things are working. In reality, you’re still juggling payments, watching the balance daily, and wondering where the money actually went.
Short answer: profit and cash are not the same thing. Not even close.
Here’s what’s usually going on, and more importantly, what to do about it.
Profit is an accounting number.
Cash is what you can actually spend.
Profit includes things like:
Cash is just what’s in the bank.
So you can be “profitable” while your cash is tied up, delayed or quietly sneaking out the back door wearing a fake moustache. 🫣
That’s where the tension comes from.
If your business is showing a profit but cash is tight, it’s usually one (or a mix) of these:
GST, PAYG withholding, income tax. None of it hits your profit in real time the way it hits your bank account.
You can have a profitable quarter and still get cleaned up by a BAS or tax bill if you haven’t been setting cash aside.
Loan repayments don’t show up as an expense in full on your P&L. Only the interest does.
So your profit might look healthy, but your cash is quietly heading out the door every month paying down principal.
You’ve earned the income. Great.
You just haven’t received it yet.
Meanwhile, you’ve already paid wages, suppliers, rent, and everything else required to deliver that work.
Common in hospitality and trade businesses.
You’re buying stock, materials, or paying for jobs before the revenue fully lands. Profit might show up eventually, but cash gets squeezed in the meantime.
A strong month followed by a soft one can leave you feeling like you’re doing well overall, but constantly short week to week.
Drawings don’t show up as an expense on your profit and loss. So the business can look profitable while cash is walking out the door to fund personal spending.
This isn’t about doing anything wrong. Owners need to get paid. That’s generally considered one of the perks of owning the thing.
But the amount and timing need to match what the business can actually afford.
If you’re regularly pulling cash out to cover personal costs, it can create a constant squeeze even when the business itself is performing well.
A quick sense check helps here. What can the business sustainably pay you versus what you’re actually taking? If there’s a gap, that’s often where the pressure is coming from.
This is not a sign your business is broken.
It’s a sign your cash flow needs managing differently to your profit.
And this is where most business owners get caught. They focus on “are we making money?” when the better question is “when does the money actually land and where does it go next?”
List out:
Not annually. Monthly. Even weekly if things are tight.
You’re trying to remove surprises. Surprises are lovely for birthdays. Terrible for business.
If tax is being paid out of your main account when it’s due, you’re always going to feel behind.
Set up a separate account and move GST and PAYG there as you go. Treat it like it’s already gone.
Because it is.
If clients are paying you late, you’re effectively funding their business.
Small tweaks make a big difference:
No need to turn into a debt collector. Just don’t be so relaxed about it.
If cash is constantly tight, sometimes the issue isn’t timing. It’s margin.
Rising costs, especially in the last couple of years, have quietly eroded a lot of pricing models.
If your business is working hard but not generating breathing room, pricing is worth a proper look.
Short-term debt with high repayments can choke a business that’s otherwise viable.
Sometimes restructuring debt, adjusting repayment terms, or having a conversation with the lender can buy you breathing room and reduce pressure.
Most people don’t ask. The ones who do are usually glad they did.
This one is not always comfortable, but it’s important.
The business needs to pay you. But it also needs enough cash left behind to fund tax, wages, growth, debt repayments and the occasional unexpected bill that arrives.
Set a realistic amount for owner pay based on cash flow, not vibes.
Vibes aren’t a payment strategy.
A profitable business can still feel stressful if the cash isn’t managed well.
The goal isn’t just profit. It’s usable, predictable cash.
Once that’s under control, things start to feel very different. Decisions get easier. The pressure lifts. You stop checking your bank balance like it’s a live footy score.
If your business is profitable but cash is tight, you’re not alone and you’re not doing something wildly wrong.
You’re just at the point where you need to switch focus and manage the flow of money properly.
That’s the shift.
And once you make it, things tend to settle down pretty quickly.
Not just the profit. The timing, the pressure points, and where cash is getting stuck.
We can help you map it out and put a plan in place so the business actually starts to feel as good as it looks on paper.
Disclaimer: This article is here to give you general info only, not professional advice specific to your unique situation. While efforts are made to ensure accuracy, the content may change over time. We can’t take responsibility for any decisions based on the contents of this article, so be sure to chat with your accountant or advisor first!
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