"The report says we made money. So where is it?"

It's one of the most common questions I'm asked, and it's a fair one. An owner looks at a profitable month, then at a bank balance that can't cover payroll, and wonders which one is lying.

Neither is. They're answering different questions. Profit measures whether you earned more than you spent. Cash measures whether the money has actually arrived. In a growing business, those two can be months apart.

Why profit and cash drift apart

A few ordinary things pull them apart:

  • Customers pay later than you deliver. You record the sale when you invoice, but the cash arrives 30, 45 or 60 days later.
  • You pay before you're paid. Payroll, rent, materials and inventory leave your account long before the related revenue comes in.
  • Some payments don't show up as expenses at all. Loan principal, owner draws and equipment purchases reduce your cash without reducing your profit the same way.
  • Growth makes it worse. More sales usually means more money tied up in unpaid invoices and upfront costs. That's why a business can grow itself into a cash shortage.

None of this means something is wrong. It means you need a second view of your business, one that runs on dates instead of totals.

Build a 13-week cash forecast

Thirteen weeks is one quarter: far enough ahead to see trouble coming, close enough to be realistic. A spreadsheet is all you need.

  1. Start with today's actual bank balance. Not projected profit or what you hope to collect. The number in the bank.
  2. List expected cash in, week by week. Use when customers actually pay, not your invoice terms. If clients usually pay in 45 days, plan for 45.
  3. List expected cash out, week by week. Payroll, rent, loan payments, subscriptions, tax deposits, vendor bills and owner draws, each in the week it leaves your account.
  4. Calculate each week's ending balance. Last week's ending balance, plus cash in, minus cash out. The low points tell you where to focus.
  5. Set a floor. Decide the lowest balance you're comfortable with, often a month of essential expenses. Any week that dips below it is a decision you get to make early: collect sooner, delay a purchase, adjust timing or arrange financing before you need it.
  6. Update it every week. Replace the oldest week's estimates with actual numbers and add a new week at the end. Fifteen minutes on Monday is enough.

What I see go wrong

The most common mistake is optimism built into the forecast: every customer pays on time, and every big sale closes this month. A forecast is only useful if it's honest about how your customers really behave.

The second is forgetting the lumpy payments: quarterly estimated taxes, annual insurance premiums, software renewals and sales tax. They don't happen every week, which is exactly why they catch owners off guard.

The third is building the forecast once and never updating it. A forecast left untouched for a month stops being a planning tool.

Where to start

Open a blank spreadsheet this week and fill in just the next four weeks. Once you can see a month ahead, extending it to thirteen weeks is easy, and you'll understand your business differently.

If you'd like help building a forecast around your actual numbers, or making sense of one you already have, schedule a consultation. We'll tell you honestly what we see.