Your business made a profit. Where is the cash?

Start with two different questions

Profit asks whether the revenue earned in a period is greater than the costs recognized for that period. Cash asks how much money is available and when it moves. Both matter, but they describe different parts of the business.

Suppose a business records NPR 8,20,000 of sales and NPR 6,25,000 of operating expenses. The simplified operating profit is NPR 1,95,000. If NPR 2,00,000 of those sales is still unpaid, the bank balance will not show the same result.

Look at the money waiting to arrive

Review unpaid customer invoices by age and expected collection date. A sales total can look strong while older invoices accumulate. Separate invoices that are due soon from those already overdue, and record who will follow up.

The useful question is not only how much is owed. It is how likely the collection is, when it is expected and which payments depend on it.

Check where cash has been committed

Stock purchases, equipment payments, loan principal and owner withdrawals can use cash without appearing as an equivalent operating expense in the same month. Supplier payments can also relate to purchases made in an earlier period.

For example, buying NPR 1,50,000 of inventory does not automatically mean that the entire amount is an expense in this month’s profit report. The treatment depends on what was sold and how the accounts are prepared. The payment still changes the cash available today.

Bring three views to the monthly conversation

Read the profit report beside a receivables list and a short cash outlook. Together they help explain the result, the collections still outstanding and the payments ahead.

• What generated the profit this month?
• Which customer payments are due or overdue?
• What supplier, payroll, tax or loan payments are coming next?
• How much cash remains available after those commitments?

Make the next decision with both views

A strong month is a reason to review the position carefully before new spending. Confirm collections, planned payments and any unusual items. Then decide whether the business can safely commit cash.

This example is intentionally simplified and does not cover every accounting adjustment. Your monthly reports should reflect your actual records and business circumstances.