Profitable But Panicked? It's Time to Master Your Cash Flow

I had a contractor in Katy call me last month in full panic mode. He’d just invoiced $187,000 in jobs. His accountant said he was profitable. His bank account had $4,200.

Payroll was in three days. He needed $28,000.

He called me before 7 AM, convinced he was going under. He wasn’t. He just had a cash timing problem. This happens more than you’d think in Houston. Really profitable businesses hitting walls because they don’t understand when money actually shows up in the bank.

The Dangers of a Deceiving Profit & Loss

Your P&L says you made $80,000 last month. Your bank account has $6,300. Both numbers can be absolutely true. That’s the gap.

I see this constantly. A retail owner in the Heights with $400,000 in inventory. A service business in Montrose carrying $120,000 in outstanding invoices. A restaurant group in Galleria with seasonal swings of $75,000. Profitable on paper. Desperate in reality.

The damage compounds. You can’t take the 15% discount on bulk supplies because you don’t have the cash. You can’t hire that manager because you’re nervous about the bank balance. You end up on credit cards at 24% interest. You lose sleep over something you could control.

What Actually Works

I’ve been doing this for a decade. Most business owners have never actually looked at a statement of cash flows. They look at profit and loss. That’s the problem.

A cash flow statement tells a different story. It shows you that selling $50,000 in product doesn’t mean $50,000 hits your bank account. Maybe you gave 30-day terms. Maybe you have $22,000 sitting in inventory. Maybe you reinvested $15,000 in equipment. Now you understand where money actually goes.

This is not complicated. It’s just honest accounting.

Then you forecast. Look at the next 90 days. When will invoices actually convert to cash? When do your vendors want payment? When is payroll hitting? When are you buying equipment or inventory?

I had a plumbing company do this exercise. They saw they were going to be $35,000 short in July even though they were profitable. So in May, they accelerated customer collections by 10 days. Suddenly July looked fine. No panic. No emergency loan. They just moved money around.

That’s cash flow forecasting. It’s not magic. It’s seeing the calendar three months out instead of being surprised every Friday.

Then fix the leaks. These are mechanical changes that move cash differently.

One: Bill faster. I have clients who invoice at month-end. That’s 30 days of money sitting in the air. Invoice when the work is done. If you do work on the 5th, invoice on the 6th.

Two: Collect faster. A general contractor I work with started offering 2% discounts for payment within 10 days instead of 30. The discount cost him 2%. The cash landing 20 days earlier cost him nothing and gave him options. He took the deal.

Three: Look at inventory. I visited a wholesale distributor in Montrose with $340,000 in dead stock. Just sitting there. We liquidated $90,000 of it and suddenly he had breathing room. Slow-moving product is a cash killer.

Four: Negotiate vendor terms. If you’re paying suppliers on 15-day terms and your customers pay you on 45-day terms, you’re going backward by 30 days every cycle. Push vendors to 30 or 45 days. It’s not rude. It’s math.

Stop the Sunday Night Panic

This isn’t rocket science. It’s seeing your business clearly. Most owners I talk to have never actually looked at a cash flow statement. They only see profit and loss. That’s like driving at night with half your headlights off.

When you know where cash is coming and going, you stop panicking. You stop taking bad debt. You stop missing opportunities. You make decisions from clarity instead of fear.

That Katy contractor I mentioned? We got his cash sorted in two weeks. Now he sleeps at night. He’s not sweating every Friday before payroll.

That can be you. Let’s talk about your cash flow. I can usually spot the issue in the first conversation.