Profit is Not Cash – And That’s Why You’re Still Stressed

Let me hit you with a truth most construction business owners only realise after they’ve been burned:

Profit is not the same as cash.

You can look great on paper, show a healthy profit on your year-end accounts, and still be losing sleep wondering how to pay wages on Friday.

I’ve had too many conversations where a business owner says,“But Ahmad, my accountant says I made £120k profit last year – so why does my bank account say something different?"

Here's why:

Your Profit & Loss Account Doesn’t Tell You the Full Story

The Profit & Loss (P&L) report is important. But it only tells you what happened over a period of time – and often, it tells you that story months too late. It includes sales you've invoiced but not yet been paid for. It excludes asset purchases and loan repayments that may be draining your cash.

It doesn’t show you what’s in your bank. It doesn’t warn you if you’re running out of money. And it certainly doesn’t help you make decisions today.

In construction, where cash flow is the lifeblood of every project, this can be the difference between a growing company and one that quietly dies despite being “profitable."

What’s Actually Happening to Your Cash?

Let’s say you’re working on a large contract worth £300,000. You’ve delivered most of the work in Q4, so your accountant includes it all in your 2024 year-end profit. But the client pays on 60-day terms and hasn’t paid you a penny by 31 December.

So yes, your P&L says you’ve made a good profit.

But:

• You’ve paid your subcontractors,
• You’ve bought materials,
• You’ve covered overheads,
• And you’re out of pocket.

Your cash is down – even if your profit is up.

Cash Flow is the Real Measure of Health

If profit is theory, cash is reality. Here’s what I mean:

• You can’t pay staff or suppliers with a profit figure.
• You can’t walk into a builders’ merchant and say, “Look, I made 20% margin last year. Can I take this load of timber on credit?”
• You can’t make strategic decisions off numbers that are nine months old.

But if you have cash in the bank and clear sight of future inflows and outflows, you can:

• Pay wages with confidence
• Negotiate discounts on materials
• Say yes to projects that need upfront capital
• Sleep better at night

That’s why I tell clients: Cash is King. Profit is a by-product.

How to Fix the Gap: Daily Visibility, Not Just Annual Reports

To get control, you need to stop thinking in terms of accounts and start thinking like a business owner. That means tracking cashflow weekly, if not daily.

I recommend a rolling 13-week cash flow forecast. It shows:

• What you have in the bank now
• What’s coming in over the next 90 days
• What’s going out (including wages, VAT, materials, and loan payments)

With this, you can see in advance if you’ll hit a pinch point. You can chase a late invoice before it creates a problem. You can delay non-essential costs or bring in funding to bridge a shortfall.

And most importantly, you stop making decisions based on hope.

What This Looks Like in Real Life

One of our clients, a growing property maintenance firm, was running blind. Every month they were playing a dangerous game of “can we cover this payroll?”

They were technically profitable. But payment delays, VAT bills, and subcontractor invoices meant their cash flow was always in crisis.

We implemented a 13-week cash flow forecast, helped their admin team reconcile accounts weekly, and introduced a clear debt collection process.

In less than three months:

• Cash reserves increased by £45,000
• The owner went from checking his bank balance 5x a day to once a week
• They took on an additional van and team with full confidence

The Bottom Line

If you don’t have clear visibility of your cash, it doesn’t matter how big your turnover is. You’re flying blind.

Don’t let “profit” give you false confidence. Focus on cash.

That’s what keeps the lights on, the vans running, and the business growing.

‍Try This

Take 15 minutes this week to map out your cash for the next 13 weeks. Start with what’s in the bank today, then list expected payments in and out.

Ask yourself: “Will we run out of cash before we get paid?” If you’re not sure - that’s your sign to act.

Want a free 13-week cash flow template you can use straight away – sign up to The Smart Contractor to receive it instantly.