SESKStuff Everyone Should Know
SESK: Stuff Everyone Should Know · sesk.info/founder-profit-can-miss-cash

How can a profitable business still run out of cash?

Profit is not cash, because sales can be recorded before customers pay.

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  1. Customers have not paid yet ✔
  2. Profit always equals bank cash
  3. Expenses disappear after a sale

Why: Accrual profit can include sales that customers have not paid yet. Bills still require available cash, so a profitable company can face a cash shortage.

Huh, didn't know that: Inventory and loan principal payments can also use cash without appearing as ordinary expenses at the same time.

The dad joke
Why did profit bring a map? It could not find the bank account.
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References

Answer: Customers have not paid yet. Accrual profit can include sales that customers have not paid yet. Bills still require available cash, so a profitable company can face a cash shortage.

  1. Financial Management for a Small Business Participant Guide catalog.fdic.gov/catalog/sfc/servlet.shepherd/document/download/069t000000Bch4LAAR
    A business can be profitable and still run out of cash.
    Checked 2026-10-11.

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