Profit cannot be paid into the bank
20 September 2026, 17:38
You sometimes hear it in March, once the accounts are closed: "we made two hundred thousand euros, and I don't know how I'm going to pay April's wages". Whoever says it thinks they have caught the accountant out in a mistake. There is no mistake. Profit and cash measure two different things, and confusing them is the quickest way to find yourself in trouble while the profit and loss account says everything is fine.
Profit tells you whether the work is worth it, cash tells you whether you can keep doing it
Profit is made the moment you issue the invoice. Cash moves the moment the customer pays. Between the two, sixty, ninety, sometimes a hundred and twenty days go by, and during those days you pay wages, suppliers and VAT regardless.
Take a company with a turnover of three million and a margin of ten per cent. On paper that is three hundred thousand euros of profit. If customers pay at ninety days and suppliers have to be settled at thirty, that company is funding two months of activity out of its own pocket: on three million of turnover, that is five hundred thousand euros tied up in working capital. The profit is there, but it sits inside the invoices still to be collected, not in the current account.
And this is where you see the difference between those who look at the accounts once a year and those who manage them every month: the former discover the problem when the bank calls, the latter see it coming three months ahead.
The three levers that decide how much cash you need
Working capital requirements are not fate. They come from three numbers, and all three can be acted on.
- Days to collect from customers. How long passes between the invoice and the bank transfer. It is the heaviest lever and also the most neglected, because it means having to ask. Ten days recovered on a turnover of three million are worth about eighty thousand euros of liquidity.
- Days of stock held. Goods standing still are money standing still. Stock that turns over in ninety days instead of sixty ties up a third more.
- Days to pay suppliers. The only lever that works in your favour, and it must be used with judgement: stretching payments to the point of straining the relationship with a strategic supplier costs more than it yields.
The difference between the days you grant and the days you get is the hole you have to fill. You can fill it with your own money or with the bank's, but fill it you must.
The right moment to notice is beforehand
A company that looks only at the profit and loss account notices the problem when the problem has already happened. By then the solutions available are few and expensive: you go to the bank in a hurry, and haste comes at a price.
A company that reasons month by month, on the other hand, sees the point where cash dips before it gets there. It knows that in July, between the thirteenth-month salary, the tax payments on account and customers' holidays slowing down collections, the current account hits its low. Knowing this in February, it has five months to decide: chase collections, reschedule an investment, ask for a credit line when it is not an emergency and therefore on better terms.
This is not forecasting: it is measurement. Everything needed is already in your numbers; it just has to be put in the order in which it will take effect.
Where to start
Before anything else, look at two items in your latest annual accounts: trade receivables and trade payables. Divide them by daily turnover. What comes out is the days you grant and the days you get. If the difference is more than thirty days, your problem is not the margin, and working on the margin will not solve it.
Profit tells you the work is worth doing. Cash tells you whether you can afford to keep doing it. They are two different questions, and both need asking.