Finance & Cash Flow
You can be profitable on paper and unable to pay salaries this month
Many owners who hit a cash crisis were profitable when it happened. This session explains the gap between profit and cash, why growth consumes money, and what to watch so the next squeeze is visible weeks before it arrives.
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Profit is an opinion. Cash is a fact.
Profit is calculated over a period and includes money you are owed. Cash is what is in the account on the day wages are due. A business can invoice a record month, book a healthy profit, and still be unable to pay for materials — because the customer pays in ninety days and the supplier wants thirty.
This is one of the commonest ways otherwise sound small businesses get into trouble, and it is usually visible in advance to somebody who knows what to look at.
What decides whether the money is there
37 topics across 7 areas. Seven things to understand and watch.
Profit Against CashThe same month can look very different in each.5 topics
A worked example: a month with the best profit on record and the worst cash position, and exactly why.
- What profit includes that cash does not
- What cash includes that profit does not
- Why an invoice is not money
- Why buying stock does not reduce profit but does empty the account
- When the two converge
Working CapitalThe money permanently trapped in running the business.5 topics
Every business funds a gap: you pay for materials and labour before the customer pays you. That gap is working capital, and it grows with revenue.
- Money owed to you
- Stock on the shelf
- Money you owe suppliers
- Why the gap widens as you grow
- How to shorten it
This is why growth consumes cash. Doubling revenue usually means funding double the gap before any of it arrives.
Getting PaidThe lever most owners under-use.6 topics
- Payment terms, and whether they were ever agreed
- Advance or part-payment
- Invoicing on time
- Following up before it is late
- Escalating without losing the customer
- When to stop supplying
Paying OthersThe other half of the same equation.6 topics
- Supplier terms and whether they can be negotiated
- Paying early for a discount, and whether it is worth it
- Staging large payments
- What must never be late — wages, statutory dues
- Time limits for paying micro and small suppliers, which carry interest and tax consequences
- What can wait a week
The Cash ReserveWhat separates a bad month from a crisis.5 topics
- How many months of fixed cost to hold
- Where to keep it
- When it is legitimate to use it
- How to rebuild it after
- Why an overdraft is not a reserve
Seeing It ComingA simple forecast beats a sophisticated one nobody updates.5 topics
Thirteen weeks, updated weekly, on one sheet. Owners who do this for the first time often find a surprise within a few weeks.
- Cash in, by week
- Cash out, by week
- The closing balance each week
- The week it goes negative
- What you would do about it now rather than then
When It Is Already TightWhat to do in the fortnight before it breaks.5 topics
- Which receivables can be accelerated
- Which payments can be staged
- What can be paused without damage
- Who to tell early — bank, supplier, family
- What not to do: borrowing at any cost, or paying wages late
Numbers worth knowing about your own business
- Average days customers take to pay
- Average days you take to pay
- Monthly fixed cost
- Months of cost held in reserve
- Revenue from your largest customer, as a share
- The week your account is lowest each month
Warning signs
- Receivables growing faster than revenue
- Using an overdraft every month rather than occasionally
- Paying statutory dues late
- One customer above a third of revenue
- Not knowing this month's closing balance without checking
- Funding growth entirely from delayed supplier payments
How the session runs
A finance professional or an owner who has been through a squeeze works one real business's numbers — the same month shown as profit and as cash. Participants then build a simple thirteen-week forecast for their own business in the room, which is where many people find their first surprise.
What your students leave with
- A working understanding of why profit and cash differ
- The reason growth consumes money rather than producing it
- A thirteen-week cash forecast for their own business
- The levers on both sides — getting paid, and paying others
- A view on how much reserve their business should hold
- Warning signs they can check monthly
Scheduled sessions
Nothing scheduled yet
Sessions are arranged with a college once a date is agreed. Ask us and we will find the right person for it.
A student rather than a college? See what is coming up, or ask your placement team to host this.
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Tell us who you are and what you have in mind. A person reads it and writes back, usually within two working days.
- Tell us what you need
A topic or a question is enough to start.
- A person replies
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- Agree the next step
We work out the details together.
Many businesses that get into this trouble were profitable when it happened.
Tell us who your students are and what stage they are at. Sessions are free for participants.