My Business Is Profitable… So Why Am I Always Short on Cash?
Your business is making money. Sales are strong. The numbers show a profit. So why does it sometimes feel like there’s never enough cash sitting in the account?
It’s a common question for small business owners, and the answer often comes down to one important distinction: profit and cash flow are not the same thing.
How Can a Profitable Business Have Cash Flow Problems?
Profit is what remains after expenses are subtracted from revenue. Cash flow is the actual movement of money in and out of your business, and timing matters.
You might complete a large job today, but if that customer doesn’t pay for 30, 60 or even 90 days, the revenue may show up on your books long before the money reaches your account.
Meanwhile, payroll, rent, inventory, insurance, taxes and other expenses keep coming.
That timing gap can put pressure on even a healthy, profitable business.
Why Does Growth Sometimes Make Cash Flow Tighter?
Growing often requires spending money before you make more money.
A business may need to purchase additional inventory, add employees, upgrade equipment or take on a larger project before the revenue from that growth arrives.
Seasonal businesses can face similar challenges. A few strong months may need to carry the business through slower periods, making planning ahead especially important.
When Should I Talk to My Banker About Cash Flow?
The best time is before you need the money.
A local banker can help you evaluate your cash flow cycle, receivables, upcoming expenses and growth plans. Depending on your business, solutions such as a line of credit, equipment financing or another commercial lending option may help you better manage the timing between money coming in and going out.
At All Capital Bank, we believe good business banking starts with understanding the business behind the numbers.
If your business is profitable but cash always feels tight, let’s talk. Stop by All Capital Bank in Broken Arrow, Locust Grove or Pryor and have a conversation with a local banker who understands business.
