Profitable but broke? Profit is not cash.
Your profit and loss says you made money, yet the bank account disagrees. Walk from profit to cash and see exactly where the difference went.
How this estimate works
Profit counts income when you earn it and expenses when you incur them. Cash only moves when money changes hands. The gap between the two almost always shows up in the same handful of places, and this calculator walks through them in order.
Owner draws and distributions take cash out but never appear as expenses. That includes money taken out to cover the owners' personal tax on the business's profit, which is common for S corporations, partnerships, and LLCs.
Loan payments are split: the interest is already an expense in your profit, but the principal is not, so principal is subtracted here. New loan money coming in adds cash without adding profit.
Equipment, vehicles, and other large purchases are usually recorded as assets and expensed over time through depreciation. The full purchase leaves the bank now, so it is subtracted, and the depreciation that reduced profit without using cash is added back.
Growth ties up cash. When customers owe you more than they did (accounts receivable), or more cash sits on the shelf (inventory), cash goes down even though sales are up. When you owe vendors more (accounts payable), they are financing you, and cash goes up.
Assumptions and limits
- Assumes accrual-basis books. If your books are kept on the cash basis, receivables and payables are not in your profit, so leave those fields at zero.
- A simplified cash flow statement. Prepaid expenses, accrued payroll, customer deposits, sales tax collected, and other balance sheet changes also move cash and are not shown separately.
- For a C corporation, use profit after income tax.
- Enter amounts for the same period, such as last year or year to date.
An estimate is a starting point
Profitable but always short on cash? We build a forecast from your books so you can see the gap coming and plan around it. This calculator is educational and is not tax advice.
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