Profit vs. cash flow

A landscaping company can have a strong bank balance in May and still be unprofitable for the year. A contractor can show a healthy profit and still feel tight on Thursday. Those two sentences confuse people because profit and cash are taught as if they were the same number. They are not.

Profit is what is left after expenses are matched to the work you did. Cash is what is actually in the account today. BlueNova Books keeps books so you can see both, because running the business on only one of them is how owners get blindsided.

Why the bank balance lies (in both directions)

Cash looks high when a large deposit lands for work you have not finished, when GST you collected is sitting in the account waiting to be remitted, or when you just drew on a line of credit. None of that is profit.

Cash looks low when customers are slow to pay, when you just bought a truck, or when you paid a stack of supplier bills for next month’s jobs. You can be profitable and tight on cash at the same time. That is not a contradiction. That is timing.

What to look at together

The profit & loss tells you whether the work is making money. The balance sheet tells you what you own and what you owe — including GST payable, unpaid invoices, and loans. The bank balance is one line on that balance sheet. Treat it as a line, not as the whole story.

• Profit & loss for margin and whether the work pays
• Aged receivables for cash that is still outside the business
• Aged payables and GST/HST owing for cash that is already spoken for
• The bank reconciliation so the cash number is real

A better monthly question

Instead of “how much is in the account?”, ask “what is profitable, what is collected, and what is already committed?” That is the conversation we want the books to support. Clean books do not just prepare you for year-end. They help you decide whether you can take the next job, hire, or wait.