You can go bankrupt while making a profit. Do you know when the money runs out?

You can have full order books, happy customers and an income statement showing a profit. Liquidity can still be heading for a serious crisis. Not because you lack customers, and not because the business is unprofitable, but because the money isn't in the bank when the bills are due. Profit isn't the same as money in the bank, and a business can have earned the money without having received it. Think of the business as a car: The result is the engine and liquidity is the fuel in the tank. You can have a powerful engine and still run out of fuel.

Imagine a business that's growing. Sales are up, new customers are coming in, and the result looks better than last year. To win contracts, the business has given its customers 60 days to pay, while salaries, suppliers and VAT have to be paid when they fall due. Each decision can make sense on its own, but together they can create a liquidity gap that only becomes visible when the payment deadline is just around the corner. Sometimes it's the growth itself that creates the problem, because more customers mean more purchases and higher costs before the payments come in.

Do you know when the money runs out? That's the question I think more business leaders should be asking. Not just "are we going to make money this year?", but "do we have enough money at the right times?" How much will we have after the next payroll run? What happens when VAT is due? How vulnerable are we if our biggest customers pay three weeks later than agreed?

Every change to the budget affects the money

In the previous post, we saw how you can change the profit and loss budget through a conversation with Capa, our AI CFO. But a decision that looks sensible for the result can also create a difficult month for liquidity, which is why you should look at both. In Capassa, the profit and loss budget and the cash flow budget are two separate budgets that are connected. When you make changes to the profit and loss budget, you're asked whether you want them made in the cash flow budget too, and when you create a new cash flow budget, you can bring in the figures from the profit and loss budget.

Capa can retrieve the cash flow budget, analyse how it develops and point to months with potential challenges, and it can show how the changes you've made to the profit and loss budget, for example in a scenario, indirectly affect liquidity. You can ask which months you should pay most attention to, and what a scenario means for the money in the bank. For example, Capa can point out that the cash balance will be at its lowest in a month when VAT, salaries and a large supplier payment fall together, even though the result that month looks good. That's the kind of connection that's easy to miss when you only look at the result.

You can also make changes directly to the cash flow budget in the Budget tab at any time.

The key is to spot it early enough

If you can see that the cash balance could become too low in three months' time, you have room to act. You can follow up outstanding invoices earlier, discuss payment terms, postpone an investment, adjust costs or arrange financing in good time. If you only discover it when the VAT deadline is a few days away, there are fewer options and they're often more expensive. Managing liquidity isn't about being pessimistic. It's about giving the business the freedom to make good decisions, even when things don't go quite according to plan.

A service the accountant can offer

For an accountant, this is also an advisory service. A cash flow budget with scenarios is something you can go through with the client before the decision is made, not after the VAT deadline is at the door. It's concrete, it's about something the client cares about, and its value is easy to explain.

Do you have control over your liquidity?

Not just how much is in the bank today, but what's coming in, what's going out, and when the cash balance could become critical. A good result tells you the business can be profitable. Good liquidity control makes it possible to keep running it.

You can have good customers, a healthy business model and a profit in the accounts, and still run into serious trouble if the money runs out.