Why your P&L says you made money and your bank account disagrees

This is one of the most common calls a bookkeeper gets from a contractor. The profit report looks healthy. The checking account does not. Both can be right, because they measure different things.

Money you were paid but haven't earned yet

Deposits and up-front payments land in the bank before the work is done. Good books treat that as money you owe in work, not income, so the profit report doesn't overstate your results.

Costs hitting before the invoice does

Materials and labor go out the door on day one. The customer pays at milestones. Your profit may be fine while cash is stretched thin in the middle of the job.

Spending that isn't an expense

Loan principal, owner draws and equipment purchases reduce your cash without showing up as ordinary costs on the profit report.

Customers who haven't paid

An invoice counts as income when it's sent. If the check hasn't arrived, the profit exists on paper only.

The fix is a monthly look at three things together: profit, cash, and what customers still owe you. That is what a good monthly close gives you.

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