Your shop is selling well. Why is there still no cash?

Ask two questions separately

First, does the business earn enough after the relevant costs? Second, does cash arrive in time to meet payments? A shop can have either problem or both. A busy counter tells you neither answer on its own.

British Business Bank distinguishes a profit-and-loss budget from a cash forecast because they measure different things. Use accounts prepared on a clear, consistent basis and a separate view of actual cash movements. Ask your bookkeeper to explain unfamiliar adjustments rather than comparing unrelated report totals.

Further reading: British Business Bank: Reforecasting in uncertain times

Trace one simple stock example

This original example ignores tax and all costs except the stock described. A shop pays £1,000 for 100 items at £10 each. It sells 40 for £20 each and receives £800. The goods sold cost £400, so gross profit on those sales is £400. Yet the stock purchase and receipts together have reduced cash by £200.

The remaining 60 items represent £600 of stock cost still on the shelf. This does not mean the £400 gross profit was imaginary; it means the shop paid for more stock than it sold during that period. Rent, wages and other costs still have to be considered.

Build a bridge from the result to the bank movement

Start with the period's financial result and identify the larger differences affecting cash. Your accountant can provide the formal reconciliation. As an owner, a short list of the main movements can reveal why the bank balance behaves differently from the sales report.

Check timing before drawing conclusions. A card settlement at the start of next month, a supplier invoice paid early or a loan repayment can make a month look surprising. Do not quietly omit tax, debt or owner withdrawals because they are inconvenient to the explanation.

• More or less money tied up in stock.
• Customer receipts still outstanding or settling later.
• Supplier bills incurred but not yet paid, or older bills paid now.
• Equipment purchases and borrowing movements.
• Tax payments, owner withdrawals and other material movements.

Choose an action that matches the cause

If the issue is excess stock, another general promotion may recover cash but reduce contribution; calculate the trade-off. If it is late receipts, investigate the actual settlement or collection process. If the underlying trading result is weak, moving payment dates does not cure it.

Likewise, new borrowing can change cash availability without making a product profitable. Treat financing decisions separately from the operating diagnosis and get qualified advice for your circumstances. If bills are already overdue, prioritise an accurate picture and timely professional support over waiting for a better week.

Make the weekly view understandable

Keep three headline figures with definitions: sales for the period, the relevant profit or contribution measure and actual cash movement. Add a short explanation of the largest difference. That is more useful than a dashboard full of numbers nobody can reconcile.

Check the explanation against bank, accounting and stock records. If you cannot connect them, record the gap and assign someone to resolve it. The objective is to know whether the next decision should concern prices, costs, purchasing, payment timing or another cause, rather than assuming that busier always means healthier.