In this week’s episode of The Business Break, we talked about why a busy business can still feel broke. The short version: profit tells you whether your business made money, and cash flow tells you whether that money is actually in the bank when you need it.
Today, let’s make it practical. Here’s a quick check you can do in about 10 minutes, no accounting degree required.
What you’ll need
- Your Profit and Loss statement (P&L) for last month, from QuickBooks, Xero, Wave, or whatever you use
- Your business bank statement for last month (or just your online banking)
- A notepad, sticky note, or the back of an envelope
No bookkeeping software? No problem. Total up last month’s business income and subtract your business expenses. That’s close enough for this exercise.
Step 1: Find last month’s net profit
Open your P&L for last month and scroll to the bottom. The number labeled Net Income or Net Profit is the one you want. Write it down.
Example: Dana’s net profit was $3,200.
Step 2: Find how much your bank balance changed
Look at your business bank balance on the first day of last month and the last day of last month. Subtract the starting balance from the ending balance.
Example: Dana started the month at $1,800 and ended at $600. Her balance went down $1,200.
Step 3: Put them side by side
Write both numbers next to each other.
Example: Profit: +$3,200. Bank change: -$1,200. That’s a $4,400 gap.
If your numbers are close, great. Your profit and cash are moving together. If they’re far apart (and for most owners, they are), keep going.
Step 4: Name one reason for the gap
You don’t have to explain every dollar. Just find one reason. Start with the four usual suspects:
- Unpaid invoices. Work you’ve earned (and maybe recorded) that hasn’t been paid yet.
- A big purchase. Equipment, a vehicle payment, or a large supply order.
- What you paid yourself. Owner draws leave the bank but usually don’t show up on the P&L.
- Taxes. A quarterly estimated payment or a catch-up tax bill.
Example: Dana found a $1,400 equipment purchase, $1,500 in owner draws, and a $1,500 quarterly tax payment. Mystery solved.
That’s it. You’re done.
Two numbers. One reason. About 10 minutes.
It might feel small, but this one check gives you something most busy owners don’t have: a clear view of why your bank account looks the way it does. And once you can see it, you can plan for it.
Want to make it a habit?
Try this check at the start of every month. Over time, you’ll start to spot patterns, like which months clients pay slowly or when your tax payments hit, and the money anxiety starts to fade.
Next week on The Business Break, we’re building on this with the easiest money habit you’ll ever start: the 15-minute weekly money date. Follow the show on Spotify, Apple Podcasts, Amazon Music, or iHeartRadio so it shows up automatically on Monday.
If you ran your numbers and something didn’t add up, or you’d just rather hand this off, I’m happy to help. Reach out at LBargerBooks.com or send me a message on LinkedIn.
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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