Why Your Business Shows a Profit But Has No Cash – And How to Fix It
Many small business owners experience this frustrating scenario: your Profit and Loss Statement says you're profitable, but your bank account tells a different story. So what gives?
At Premium Consultancy Services Limited (PCS), we have helped countless small business owners across Jamaica make sense of this very issue. Your business can be profitable on paper yet still struggle to keep cash flowing. Let’s break down why this happens—and what you can do about it.
Profit Isn’t the Same as Cash
Here's the key difference:
Profit (Net Income): The amount left after subtracting all expenses from revenue.
Cash Flow: The actual movement of money in and out of your business.
You can have a profit on your income statement, but no cash in the bank, for several reasons.
1. Delayed Payments From Customers (Accounts Receivable Lag)
When you invoice a client, the revenue is recorded—even if you haven’t been paid yet. If your business runs on accrual accounting, this is likely happening more than you realize.
📝 Example:
You invoice a client $200,000 in November. That’s counted as income. But if they pay in February, you don’t actually have the cash yet.
💡 PCS Tip:
Use accounting softwares, like QuickBooks Online or Zoho Books, to track outstanding invoices. Enforce clear payment terms and follow up consistently. Offer incentives for early payments if needed.
2. You Bought Inventory or Supplies
Spending money on stock reduces cash immediately, but it doesn’t hit your Profit & Loss until you actually sell the items.
💡 PCS Tip:
Avoid over-purchasing inventory. Monitor your turnover rates and plan purchases based on trends.
3. Loan or Debt Repayments
Repaying a loan (especially the principal portion) doesn’t reduce your profit, but it does reduce your cash.
💡 PCS Tip:
Always include loan payments in your cash flow forecast—not just your budget.
4. Capital Expenditures (Buying Equipment)
Bought a new laptop, printer, or vehicle for your business? These don’t show up as an expense all at once. Instead, they are capitalized and depreciated over time—even though the money leaves your account immediately.
💡 PCS Tip:
Plan major purchases strategically. Use equipment financing when appropriate to ease the impact on cash.
5. Paying Suppliers Faster Than You Get Paid
Many businesses pay their vendors quickly but wait weeks or even months to get paid by clients.
💡 PCS Tip:
Negotiate better payment terms with suppliers and clients to create balance in your cash flow cycle.
6. Owner Withdrawals
As a business owner, you might take drawings or transfers from the business. These don’t show up on your income statement but significantly impact your bank balance.
💡 PCS Tip:
Set a fixed monthly draw and track your withdrawals. Treat them as part of your overall financial planning.
How to Manage This and Avoid Cash Surprises
✅ Create a Monthly Cash Flow Forecast
Plan for incoming and outgoing cash so you can anticipate and avoid shortfalls.
✅ Monitor All Financial Statements
Look beyond your Profit & Loss. Regularly review your Cash Flow Statement and Balance Sheet for the full financial picture.
✅ Use Cloud Accounting Software
QuickBooks Online or Zoho Books helps track payments, expenses, and cash activity in real-time.
✅ Build a Cash Reserve
Set aside funds during profitable months for use in slower seasons or emergencies.
✅ Work With a Financial Professional
A qualified bookkeeper or accountant can provide clarity and help you make informed decisions.
Let PCS Help You Stay Cash-Ready
At PCS Jamaica, we help small businesses build smart, sustainable financial systems. From bookkeeping clean-up to cash flow forecasting and QuickBooks & Zoho Books support, our goal is to help you keep more of your money, understand your numbers, and grow your business with confidence.
📞 Book a free introductory call with our team today—we can review your financials and offer insights into improving your cash flow.
👉 Visit www.pcsjm.com or email us at info@pcsjm.com to get started.