You can be profitable and still feel broke.
I have had a few conversations recently with founders who are doing well on paper.
They are making good profit.
They are setting aside tax.
They are paying themselves dividends.
And yet, they still feel like cash is tight.
The question always comes up.
Where is the money?
The answer is rarely one simple thing.
It is usually a combination of a few factors.
The first is history.
Before we started working together, many of these businesses went through periods where they did not have clear visibility of their numbers.
They were making decisions based on what they needed personally, not what the business could afford.
Dividends were taken when cash happened to be there. Not when profit genuinely supported it.
Over time, that eats into reserves.
In some cases, founders have unknowingly been paying themselves out of money that should have been set aside for tax or future obligations.
The second is timing.
On paper, the business is profitable.
In reality, cash is moving at different speeds.
Suppliers are paid quickly.
Wages go out every month.
But customers might be taking 30, 60 or even 90 days to pay.
That gap creates pressure.
You are profitable, but the cash has not arrived yet.
The third is misunderstanding what profit actually means.
Profit is not cash sitting in your bank account.
It is a measure of performance over a period of time.
Cash is what you have available right now.
The two are linked, but they are not the same.
This is why a business can look healthy in the accounts but still feel stretched day to day.
Once you understand this properly, the conversation changes.
It is no longer "where has the money gone?"
It becomes:
"How is cash flowing through the business, and where is it getting stuck?"
That is where control starts.
More to come,
Luke