Booked solid but always short on cash? If you caught this week’s episode of The Business Break, you met Dana, a mobile groomer who had her best month ever ($9,000) and ended it with $600 in the bank. Her business was profitable. Her cash flow was the problem.
This article picks up where the episode left off. Instead of re-explaining the “why,” let’s get into the “now what”: how to tell which problem you actually have, and what to do about each of the four most common cash gaps.
The 30-second version
- Profit is income minus expenses over a period of time. It answers: Did my business make money?
- Cash flow is money moving in and out of your bank account, and when. It answers: Can I pay my bills right now?
You can have one without the other. Most money stress lives in the gap between them.
Quick check: profit problem or cash flow problem?
It’s probably a cash flow problem if:
- Your P&L (Profit and Loss statement) shows a profit most months, but your bank balance doesn’t grow
- Money feels tight right after big purchases or tax payments
- You have unpaid invoices more than 30 days old
- Some months feel flush and others feel scary
It might be a profit problem if:
- Your P&L shows a loss, or barely breaks even, even in busy months
- You haven’t raised your prices in over a year
- Your costs (supplies, fuel, payroll) have gone up, but your rates haven’t
- There’s never anything left after expenses, no matter how busy you are
Not sure, or don’t have an up-to-date P&L? That’s your answer: you need clearer books before you can tell. And that’s very fixable.
How to close the four cash gaps
1. Slow-paying clients
What it looks like: A cleaning company with a few commercial clients on net-30 terms (payment due 30 days after the invoice). The work happens in October, the money shows up in late November, and payroll doesn’t wait.
What helps:
- Invoice the same day the job is done, not at the end of the week or month
- Shorten terms for new clients to due on receipt or net-7
- Accept cards or ACH so paying takes one click. The small fee is often worth getting paid weeks sooner
- Put recurring clients on autopay
- Follow up on anything 7 days past due. A friendly nudge works more often than you’d think
2. Big one-time purchases
What it looks like: A lawn care owner buys a new zero-turn mower in March, right before revenue ramps up, and spends the whole spring catching up.
What helps:
- Keep a simple equipment fund and add a set amount every month, so big purchases come from savings instead of this month’s cash
- Time big purchases for your strongest cash months, not your slowest
- Compare paying cash vs. financing. Sometimes a reasonable payment plan protects your cushion better
- Ask your tax pro about timing, since when you buy can affect your taxes too
3. Owner draws
What it looks like: A salon owner pays herself whenever the account “looks okay.” Some months she takes a lot, some months nothing, and she never knows what’s actually safe to take.
What helps:
- Pay yourself a set amount on a set schedule (like the 1st and 15th)
- Start small if you need to. A consistent amount beats an unpredictable one
- Review the amount every quarter and raise it as the business grows
We’ll go deeper on this one in Episode 6, Pay Yourself First.
4. Taxes you didn’t set aside
What it looks like: A handyman has a great summer, doesn’t set anything aside, and the September estimated tax payment wipes out his cushion.
What helps:
- Open a separate savings account just for taxes
- Every time you get paid, move a set percentage into it. Your tax pro can help you pick the right number for your situation
- Put the quarterly estimated tax due dates on your calendar now (typically April, June, September, and January)
- Treat that account as untouchable. It’s money you’re holding for the IRS, not money you can spend
Then build a cash cushion
Once the gaps are under control, aim for a cash cushion: enough in the bank to cover about one month of regular business expenses. Seasonal businesses (lawn care, pool service, holiday-heavy salons) may want two or three months to get through the slow season. Build it a little at a time. Even $100 a week adds up.
Common questions
Why is my business profitable but I have no money?
Usually because profit and cash move on different schedules. Unpaid invoices, big purchases, owner draws, and tax payments can all drain cash without showing up as a loss on your P&L.
How often should I check my cash flow?
Weekly is ideal for small service businesses. A quick look at your bank balance, what’s coming in, and what’s due in the next two weeks is plenty. Next week’s episode is all about building that 15-minute habit.
Which matters more, profit or cash flow?
You need both. Profit tells you if your business model works. Cash flow tells you if you can keep the lights on while it does.
Do I need special software to track cash flow?
No. Clean, categorized books and a simple list of upcoming income and bills will get you most of the way there.
Your One Thing to Fix this week
Compare last month’s profit to how much your bank balance actually changed, and name one reason for the gap. Then find that gap in the list above and pick one fix to try this month.
Thursday’s article, The 10-Minute Profit vs. Cash Check, walks through the exercise step by step.
Listen to the full episode
This article goes with Episode 1 of The Business Break: Busy but Broke? Profit vs. Cash Flow. Listen on Spotify, Apple Podcasts, Amazon Music, or iHeartRadio, or find it on the Podcast page here.
Let’s connect
If this one hit a little close to home, you’re not alone, and you don’t have to sort it out by yourself. Send me a message on LinkedIn or schedule time to talk with me here.
Focus on what you love. I’ll take care of the rest.
This article is for general education, not tax or legal advice. Every business is different, so check with your tax professional about your specific situation.
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