It happens every year. I sit down with a client, present their beautifully prepared financials, point to the bottom line and say: “You made half a million in profit last year!”
They lean forward, studying the numbers with suspicion and inevitably ask “So if the business made that much, why isn’t it showing up in my bank?”
That’s when I explain, profit isn’t a pile of cash, but a figure shaped by the moving parts of the business. It’s the start of a valuable conversation about where the money is really working.
The Grand Tour: Where Your Profit Really Went
Profit doesn’t vanish. It just takes a detour through your business and doesn’t always stop by your bank account. Here’s where it usually goes:
- Debtors – Your money is still sitting with customers who haven’t paid you yet.
- Creditors – Suppliers and service providers who happily collected their share.
- Asset Purchases – New equipment, fitouts or systems that improved operations (but drained cash).
- Expansion Costs – Hiring, marketing or opening a new branch are all exciting, all expensive.
- Loan Repayments – Banks never miss their turn.
- Director Loans – Money borrowed from the business isn’t gone, just shifted.
- Stock or Inventory – Cash tied up in products sitting on shelves or in warehouses. Until it’s sold, it’s not showing up as money in the bank.
Profit is a measure of performance. Cash flow is the reality of money moving in and out. They’re connected, but not the same thing.
Making Profit Work for You
The good news? Once you know where your profit goes, you can steer it.
- Collect faster from debtors.
- Stay ahead of tax and super.
- Keep expenses lean.
- Plan cash before you grow.
The result is fewer “Where’s my money?” moments. More “Here’s my plan” moments.
So yes, the profit is real. It’s not lost. It’s just busy working across your business.