A company can sell profitable work, report profit, and still miss payroll.
INVOICE SENT$120,000Customer pays in 60 days
BUT
PAYROLL DUE$70,000This Friday
TAKEAWAYProfit measures the result. Cash determines whether the company can operate today.
/ Vote
Is this company doing well?
It completed $120,000 of work at a total cost of $90,000. The client pays in 60 days. The company has $20,000 in the bank and $70,000 of payroll due Friday.
TAKEAWAYA company can be profitable on paper and unable to pay its obligations.
/ Reveal
The timing gap is the problem
Revenue may be recognized before cash is collected. Costs often leave earlier.
DAY 1–30Work performedPayroll and vendors paid
DAY 30Invoice issuedRevenue recorded
DAY 60–90Customer paysCash finally arrives
TAKEAWAYThe business must finance the time between doing the work and collecting the cash.
/ The Basics
Where cash gets delayed or consumed
These are operating mechanics, not accounting trivia.
RECEIVABLES
Money customers owe you.
PAYABLES
Money you owe suppliers and vendors.
PAYMENT TERMS
When each side is required to pay.
INVENTORY
Cash already spent on items not yet sold.
WORKING CAPITAL
Cash available to run normal operations.
DEBT / CREDIT
Borrowed cash that bridges timing—with a cost.
TAKEAWAYCash gets trapped in time, inventory, and obligations.
/ The Trap
Fast growth can consume cash faster
More sales may require more labor, materials, inventory, and delivery before customers pay.
MORE ORDERS
→
MORE UPFRONT COST
→
MORE RECEIVABLES
→
LESS CASH TODAY
TAKEAWAYGrowth is dangerous when the business funds customers for too long.
/ Team Challenge
Keep the company alive
You start with $50,000 cash. The company is profitable, but the next customer payment arrives in 45 days.
PAYROLL IN 7 DAYS $35KVENDOR IN 14 DAYS $20KNEW PROJECT COST $25K
A
Hire now for $12K/month
B
Require a 40% project deposit
C
Offer 3% discount for payment in 10 days
D
Buy $30K inventory for projected demand
E
Extend vendor terms from 15 to 45 days
F
Use a line of credit at 10%
TAKEAWAYChoose actions based on when cash moves—not only whether each action is profitable eventually.
/ Pressure Test
Liquidity decisions have trade-offs
Protecting cash today can reduce profit, growth, supplier trust, or future flexibility.
DEPOSIT
Improves cash; may increase sales friction.
EARLY-PAY DISCOUNT
Accelerates cash; gives away margin.
LONGER PAYABLES
Preserves cash; may strain vendors.
CREDIT
Bridges timing; adds interest and repayment risk.
TAKEAWAYCash management is choosing which timing and relationship costs the business can carry.
/ Example
One defensible survival plan
The exact answer depends on customer and vendor leverage, but the sequence is rational.
1Require a deposit on the new projectBring part of the project cash forward.
2Negotiate longer vendor termsMatch cash out more closely to cash in.
3Use credit only for the remaining short gapBorrow against a known receivable—not an undefined loss.
DELAYNew hire and speculative inventoryBoth increase cash use before collection.
TAKEAWAYThe strongest cash plan shortens the timing gap before adding permanent cost.
/ Close
Profit and cash answer different questions
You need both to operate a durable business.
PROFIT
Did the business create economic value?
CASH
Can the business pay what is due?
TAKEAWAYA profitable company can fail from timing. A cash-rich company can still have a weak business.
LESSON 3
Profit Is Not Cash
Choose the presentation view. Audience shows only the teaching slides. Facilitator adds timing, scripts, prompts, answer guidance and watch-outs.