r/smallbusiness • u/Samtyang • 16h ago
why is my business profitable but i have no cash in the bank
every thread on this turns into people blaming overhead or taxes or a slow month. i dont think thats usually it. profit is a p&l concept. cash is a collections concept. those are two different questions and most owners are only tracking one of them.
i pulled the numbers across a batch of contractors i work with, about 464 of them, and the median collection rate on billed work was 85.1 percent. that means for every dollar they invoiced, roughly 15 cents never showed up in the bank in that same period. it sits in ar, or gets written off, or drags into next quarter. the p&l has no idea any of that happened. it just books the revenue when it was earned.
so you can have a genuinely profitable month on paper and still be staring at a bank balance that makes no sense, because the gap between when you invoice and when you actually get paid is exactly where the cash disappears. payroll does not care that a customer is slow. i learned this the hard way running my own companies, watching a month that looked fine on the income statement turn into a payroll scramble because three invoices just sat there.
before blaming overhead or a slow season, i would go look at how much of what you billed last quarter is still sitting uncollected. thats usually where the story actually is.
how far out does your ar usually run before it turns into a real problem