Understand what profit is showing
Profit reflects income and expenses recognized in the accounts for a period. It does not necessarily match the cash collected and paid during that same period.
Look at collections and commitments
Customer payment timing, inventory purchases, loan payments, owner withdrawals, and capital expenditure can affect available cash. Review these movements alongside your income statement.
Build a short-term cash view
Start with current bank balances, then map expected collections and known commitments. Make assumptions about timing explicit and update the forecast as new information arrives.
Review the forecast regularly
Use the forecast as a working discussion tool. Compare actual movements with the plan and decide which collections, costs, or spending commitments need attention.
General information only. This guide is not individualized accounting, tax, legal, or investment advice. Discuss your circumstances with an appropriately qualified professional.