Your business is doing well. At least, that’s what the numbers tell you. Revenue is climbing, and profit margins seem decent. However, your bank account tells an entirely different story. You’re constantly chasing payments, and monthly bills continue to worry you.

This is one of the most confusing stages of growth. You’re technically profitable, yet cash flow feels squeezed. It’s frustrating, and it catches a lot of founders off guard.

So what’s going on?

The truth is that new business players assume that profit and cash flow are the same, which they aren’t. They play different roles, follow different timelines, and are influenced by other things. If you don’t understand that gap, you might think your business is broken when it’s not. Or worse, you might keep spending based on what your P&L says without realizing your actual cash position is stretched thin.

Let’s clear up the difference and figure out how to get better visibility on your numbers.

Profit vs Cash

Your profit and loss statement (P&L) serves as an overview of income and expenses within a certain time period. It tells you whether your business earned more than it spent. But it doesn’t show when money is entered or left in your account.

You could have thousands in “profit” from sales that haven’t been paid yet. That money looks great in your accounting software but isn’t helping you cover this week’s expenses. On the flip side, you might have already paid for inventory that won’t bring revenue until next quarter. So, even though it’s a smart investment, it feels like a drain right now.

Profit is a measure of performance. Cash flow is a measure of timing. Both matter, but if you only track one, you’re flying blind and behind.

Growth Makes It Worse Before It Gets Better

Growth is exciting, but it puts pressure on cash. You need to invest in more stock, more staff, and better tools. If your revenue hasn’t turned into cash in the bank yet, you’re fronting the cost of that growth from your reserves—or a credit card.

This is especially true for startups in fast-paced industries like eCommerce or SaaS. Sales pick up, but so do overheads and costs of delivery. By the time the money lands, it’s already spoken for.

There’s nothing wrong with fast growth. It just needs a cash plan to go with it. Otherwise, you’re celebrating numbers that don’t reflect your financial reality.

Here’s What Usually Creates the Gap

If your books say you’re profitable, but your wallet disagrees, check these common culprits:

Slow-paying clients. Income is counted the day you invoice, not when you get paid.

• Inventory stockpiling. Buying too much upfront ties up cash for months.
• Big lump-sum expenses. One-time payments look small when spread over the year, but they hurt the moment they hit.
• High tax liabilities. You owe taxes on profit, even if that profit is tied up in unpaid invoices.
• Debt repayments. Loans don’t show up on your P&L, but repayments come out of your cash flow.

When you see these patterns for what they are, it gets easier to adjust how you manage your cash—even if your profit looks fine.

Start Looking at Both Reports Together

One of the most helpful habits you can build is reviewing your profit and loss alongside your cash flow report. They tell different stories, and when you see them together, the full picture makes more sense.

Profit tells you what’s working long-term. Cash flow shows you what’s working right now. If one looks good but the other looks off, you’ve got something to dig into.

You don’t have to do this alone, either. Many founders lean on accounting firms for startups because they know the financial backend doesn’t stay simple for long. These firms help you spot cash leaks, build better forecasts, and design systems that grow with you, and not after you’ve outgrown them.

You Can’t Fix What You Don’t Track

This might sound obvious, but it’s worth repeating. You can’t improve cash flow until you track it clearly. That means knowing when invoices are due, when bills hit, and how long you’re waiting between delivery and payment.

Even if your business is still small, you should know your cash cycle. How long does it take for a dollar you spend to come back as revenue? Once you know that, you can pace your decisions better. Maybe you don’t buy that second batch of stock yet. Maybe you should wait a week before onboarding that new software.

Profit is great. But profit without cash is like winning a prize you can’t take home. When you understand both sides, your business becomes a lot less stressful—and a lot more sustainable.

Published by HOLR Magazine.