Profitable but No Cash? 7 Reasons U.S. Businesses Run Out of Money
Short Answer
A business can show profit on its income statement and still run out of cash due to timing gaps, inventory buildup, payroll expansion, tax accrual errors, or lack of forecasting. Profit and cash flow are not the same.
Revenue Does Not Equal Cash Flow
Revenue is recorded when earned.
Cash flow reflects when money actually moves.
If customers pay on 30–60 day terms, your income statement may show profit while your bank account runs dry.
1. Accounts Receivable Is Growing Faster Than Collections
Warning signs:
- AR aging past 45 days
- Increasing write-offs
- Customers constantly “paying soon”
Without structured collection systems, cash stalls.
2. Inventory Is Tying Up Working Capital
For product-based businesses:
- Excess purchasing
- Dead stock
- Overestimated demand
Inventory absorbs cash before revenue is realized.
Inventory consulting and forecasting often unlock trapped liquidity.
3. Payroll Growth Outpaced Revenue
Hiring ahead of revenue is common during growth.
But without modeling:
- Payroll taxes
- Benefits
- Workers’ comp
- Overtime creep
Cash flow deteriorates quickly.
4. Taxes Were Not Properly Accrued
Many U.S. businesses fail to:
- Accrue payroll taxes weekly
- Plan for quarterly estimated taxes
- Model federal and state obligations
Tax bills become cash crises.
5. Debt Structure Is Misaligned
High-interest short-term debt creates:
- Heavy monthly servicing
- Cash strain
- Compounding stress
Restructuring or refinancing may reduce payment burden.
6. No 13-Week Cash Flow Forecast
A 13-week rolling forecast is standard for financially controlled businesses.
Without one, surprises become frequent.
7. Margins Are Misunderstood
If you don’t know:
- True gross margin
- Contribution margin
- Fully loaded cost per employee
You may be pricing below sustainability.
How a Fractional CFO Fixes “Profitable but No Cash”
- Builds rolling forecasts
- Analyzes margins
- Aligns payroll with revenue
- Plans tax strategy
- Optimizes inventory
- Recommends debt adjustments
The goal: convert accounting profit into real cash stability.
Who This Applies To
U.S.-based businesses that:
- Generate $1M+ in annual revenue
- Experience growth volatility
- Feel constant cash pressure despite sales
Not intended for:
- Personal finance
- Hobby businesses
Frequently Asked Questions
Why is my business profitable but broke?
Because profit measures accounting performance. Cash flow measures liquidity. Timing differences create the gap.
What is a 13-week cash flow forecast?
A weekly projection of expected inflows and outflows over 13 weeks to anticipate shortages before they occur.
At what revenue should I hire a fractional CFO?
Typically $2M+ revenue or when financial complexity increases beyond bookkeeping.
Next Step
If your business is profitable on paper but cash remains tight, schedule a call to determine the root cause.