Where Did My Cash Go

By Robin Stevens, Internal Operations Coach

How come my income statement shows a profit of $80,000.00, but my bank account shows $10,000.00. WHERE’S THE MONEY!!!!!

Profit doesn’t equal cash. I know this is a hard concept for people to understand, but I’m going to try to explain how to see where your cash is going through your cash flow statement. Your cash flow statement shows how much money is coming in and going out of your business, ultimately reflecting how much cash a business generated in any given period.

Cash inflows

  • Cash received for services performed
  • Lenders
  • Sale of equipment
  • Investors

Revenue is not cash in the bank, cash in the bank is when you get paid.

Cash outflow

  • Payroll and taxes
  • Suppliers
  • Creditors
  • Purchase of equipment

Remember a purchase made on credit is not considered cash outflow until a check is written.

A cash flow statement has three parts:

1. Cash flow from operating activities: This starts with net income from the income statement and then adds back all non-cash operating expenses like depreciation. This also reflects increases and decreases in accounts receivable and payables.

2. Investing Activities: Cash used for the purchase of new assets like equipment, trucks or land or the sale of assets.

3. Financing Activities: This section reflects the movement of cash between the business and its owners and creditors.


Your company may be very profitable, but yet you are constantly short on cash. The cash flow statement shows where your cash is going as there are items that take cash out of your business in which you do not see on the income statement; like principal on a loan payment, credit card payments and owner’s draw.

If you don’t clearly understand your financial situation ask for an appointment with your accountant to go over these following reports and don’t just review them, get understanding and ask questions. Even a company that shows to be profitable based on accounting standards can go under if there isn’t enough cash on hand to pay bills.

1. Income Statement

2. Balance Sheet

3. Statement of Cash Flow

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