Your profit and loss says the business made money. Your bank account says otherwise. Wages are due Thursday, the BAS is due at the end of the month, and you are paying yourself last again. This is one of the most common problems we see in Brisbane businesses, and it almost always has a cause that can be found and fixed. Here is where the cash usually goes and what to do about it.
Profit is an accounting measure. It records a sale when you invoice, not when the customer pays, and it records an expense when you receive the bill, not when you pay it. Cash is what actually moved through the bank. The two drift apart every month, and in a growing or seasonal business they can drift a long way.
Several things that eat cash never appear on the profit and loss at all. Loan principal repayments, equipment bought outright, stock sitting on the shelf, owner drawings, and the income tax paid on last year's profit are all cash out the door that leave profit untouched. A business can show a healthy profit, pay for all of those, and finish the year with less in the bank than it started with.
So the first job is not to work harder or sell more. It is to find out exactly where the cash is going, because each cause has a different fix, and the wrong fix costs money you do not have.
When an owner tells us the business is profitable but there is never any money, we look at the same half-dozen places first. Most businesses have two or three of these running at once.
Growth deserves a special mention because it feels like success while it is draining the account. A business that doubles its sales usually has to double its debtors, its stock and its wages bill before the extra cash arrives. Owners who are busiest and most profitable on paper are often the ones with the least cash, and the fix is a working capital plan, not a sales push.
A quick way to see this yourself is to compare your profit for the year with the change in your bank balance over the same period. The difference is explained by the items above, and the statement of cash flows in Xero will show most of it line by line.
The single most useful tool for a business in this position is a 13-week cash flow forecast. It is a week-by-week view of the bank balance for the next quarter, built from real invoices, real bills, the actual pay run, super due dates and the next BAS. It is not a budget and it is not a guess. It starts from today's bank balance and shows where the low points are.
Once the low points are visible, the decisions become practical. Chase the three largest debtors before week six. Delay a vehicle purchase until the BAS is paid. Talk to the bank about an overdraft while the numbers are still calm rather than after a payment bounces. Update the forecast each week and the surprises stop.
We build these forecasts from your Xero file as part of our cash flow forecasting service, then maintain them with you so the forecast stays live rather than becoming a spreadsheet in a folder.
Debtor days are the cause we can shift fastest. Many businesses invoice late, offer terms they never agreed to, and follow up only when things are desperate. Tightening this is unglamorous and it works.
For trades and construction clients around Brisbane and Logan, this often means reviewing progress claim timing and retention amounts, which can tie up a surprising share of a year's profit until the defects period ends.
Tax has its own rhythm that rarely matches the business. GST is collected on sales as they are invoiced or paid, then remitted quarterly. PAYG instalments are based on last year's income, so a business that grew last year pays instalments that feel large this year, and a business that has slowed keeps paying as if it had not. The income tax on a good year arrives months after the cash from that year has been spent.
The fix is to treat tax as a weekly cost rather than a quarterly shock. Set aside GST and a sensible share of profit into a separate account as the money comes in. Vary PAYG instalments when income has genuinely changed, within the rules, because varying too low attracts interest. Plan the year-end tax position before 30 June rather than discovering it in October. If the business is already behind, our page on ATO tax debt and payment plans explains the options.
Super guarantee is due quarterly and PAYG withholding is reported through STP every pay run, so those are not negotiable timing-wise. Where a BAS genuinely cannot be paid in full, lodge it on time regardless and arrange a payment plan early. The ATO is far more flexible with a business that has lodged and asked than with one that has gone quiet.
When a business comes to us with this problem, the first month follows a set pattern. It is diagnostic first and prescriptive second, because the wrong fix wastes money.
By the end of the first month you know where the cash went, what the next quarter looks like and which two or three changes will make the biggest difference. From there it becomes part of our ongoing bookkeeping and virtual CFO work, or you take the forecast and run it yourself.
We see this problem most often in trades and construction, transport, allied health, retail with stock, and professional services firms that have grown quickly. Our Victoria Point office serves the Redlands and Brisbane, our Jimboomba office serves Logan and the Scenic Rim, and clients elsewhere in Australia work with us by video with the same Xero-based process.
If the business is fundamentally sound but the cash never seems to be there, that is a solvable problem. If the numbers show something deeper, such as pricing that does not cover costs or a product line that loses money on every sale, we will tell you that too, and we can help with a restructure or a hard look at the model.
One more thing that often helps: pay yourself a fixed, sensible amount on a schedule rather than drawing whatever is in the account on a Friday. It makes the forecast honest, it keeps the company clean from a Division 7A point of view, and it is the only way to know whether the business can actually afford you.
Profit counts sales when invoiced and expenses when billed, while cash only moves when money is actually paid. Slow-paying customers, stock, loan principal repayments, equipment purchases, owner drawings and tax on last year's profit all consume cash without reducing profit. Compare your annual profit with the change in your bank balance and the gap will usually be explained by two or three of those items.
It is a week-by-week projection of your bank balance for the next quarter, built from actual invoices, bills, payroll, super, BAS and loan payments rather than averages. It starts from today's balance and shows the low points so you can act before they arrive. It is updated weekly and is the standard tool for managing a business through a tight cash period.
Invoice immediately on completion, state terms clearly, take deposits or progress payments on larger jobs, send automated reminders from Xero, and make paying easy with card or direct debit. Follow up personally on anything past due. Most businesses can cut debtor days noticeably within a quarter simply by invoicing sooner and following up on a fixed schedule rather than when cash is desperate.
It depends on your structure. In a company, regular drawings that are not wages or dividends can create Division 7A problems, so a salary through STP plus planned dividends is usually cleaner. Sole traders and trusts have more flexibility, but drawings should still be planned against profit that has actually been collected, not profit on paper, and tracked in Xero so year end holds no surprises.
Yes. PAYG instalments are based on your last lodged return, so if income has genuinely fallen you can vary the instalment amount or rate down on your activity statement. Be careful, because if the varied amount ends up well below the actual tax for the year, the ATO can charge interest on the shortfall. We calculate the variation from current Xero figures so it is defensible.
The diagnosis takes a few weeks once the bookkeeping is current. Changes to invoicing and collections start showing within a quarter. Structural causes such as excess stock, growth outrunning working capital or a tax lag take longer and may need a facility or a payment plan to bridge. A 13-week forecast tells you quickly whether the problem is timing or something deeper.
