This is one of the most frustrating things about running a business. You look at your profit and loss statement showing positive numbers, then check your bank account and wonder where all the money went. The short answer is that profit measures performance while cash measures actual money movement. They’re calculated differently and don’t always move together.

Profit is based on when you earn revenue and incur expenses. Cash is based on when money actually changes hands. These timing differences create the gap you’re experiencing.

Accounts receivable is usually the biggest culprit. You invoice a customer for $15,000 and your profit goes up immediately. But if they take 45 days to pay, your bank balance doesn’t change for six weeks. If your AR balance keeps growing faster than your revenue, customers are paying slower and you’re essentially financing their operations with your cash.

Equipment and asset purchases drain cash without affecting profit the same way. You buy a $30,000 truck. Your cash drops by $30,000, or you start making monthly payments. But on your P&L, you only see a small depreciation expense each year. The rest of that cash outflow doesn’t show up as an expense because you gained an asset of equal value.

Loan principal payments use cash but aren’t expenses. If you’re paying $2,000 a month on a loan, only the interest portion reduces your profit. The principal payment just pays down a liability. You might have $1,400 a month going out the door that never touches your income statement.

Owner draws reduce cash but not profit. You take $6,000 out of the business this month. That’s a distribution, not an expense. Your profit stays the same while your bank account drops.

Growth eats cash faster than most owners expect. More sales typically means more inventory, more receivables, and possibly more employees you’re paying before clients pay you. A profitable growing business can actually be more cash-strapped than a slow steady one because you’re constantly reinvesting.

For contractors and service businesses in MetroWest, progress billing timing and retainage add another layer. You’ve completed the work and the profit is real, but the check is still 30 to 60 days away.

The fix starts with understanding where your cash actually goes. Cash flow planning shows you what’s happening with money movement separate from your P&L. You can be profitable and still run out of cash if you’re not watching the timing.

Tightening collections helps immediately. If customers are paying in 45 days and you could get them to 30, that’s two weeks of cash back in your pocket. Negotiating better payment terms with vendors helps on the other side.

Good small business bookkeeping in MetroWest Massachusetts gives you both pictures. Knowing your profit margin matters for pricing and long-term health. Knowing whether you can make payroll next Friday is more urgent. You need to see both to run the business without surprises.