Your P&L Says You're Profitable. So Where Did the Money Go?
Profit ≠ bank balance. Receivables, loan repayments, materials, capital expenditure and timing differences explain where the money actually went.
The P&L says the business is profitable. The bank balance disagrees. Both can be right — here's why.
Profit ≠ Bank Balance
Profit is measured over a period. The bank balance is a snapshot of a moment — after everything the business has paid for and everything it hasn't yet collected.
Where the Money Goes
- Receivables — profit is recorded, but customers haven't paid yet
- Loan repayments — principal repayments leave the bank but don't touch the P&L
- Inventory and materials — cash converted into stock sitting on shelves or on site
- Capital expenditure — equipment purchases leave the bank in one lump
- Supplier payments — payments made ahead of the revenue they support
- Timing differences — costs paid early, revenue collected late
The Practical Habit
Watch profit for performance — and cash movement for survival. A business needs both stories, told side by side.
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Wafra Insights provides general information for educational purposes and should not be treated as accounting, tax, legal or other professional advice specific to your circumstances. Requirements may differ depending on your business and situation. Seek appropriate professional advice where required.