Your P&L says you made money last month, but your bank account says otherwise.
If you’ve ever stared at both and wondered which one is lying, you’re in good company.
The answer is neither, they’re just telling different stories.
Why Your P&L Doesn’t Match Your Bank Account
Honestly, the P&L can be confusing because it’s not built to tell you about cash.
It doesn’t match your bank account because when you pay for inventory, the cash leaves your bank right away.
However, it doesn’t show up on your P&L until the product sells, which could be months later.
And loan payments and owner draws don’t even show up on the P&L at all.
They live on the balance sheet, which is where us accountants like to joke that we bury the dead bodies.
Plus Amazon holds your money for a while before it pays you out.
So profit can be real on paper while the cash is tied up somewhere else.
Profit vs Cash Flow: Start With What Makes Sense
The second of Ron Baker’s four spheres is wisdom and understanding.
His note for it was about helping clients think about cash.
What we do instead of starting with the P&L is start with two things that make intuitive sense: cash runway and unit economics.
How long does your cash last? And what does each product actually leave you after fees, ads, and fulfillment?
Wisdom, Not Just More Data
There is nothing like being on a call when an ecom brand owner finally sees it clearly.
We had a client look at their product-level numbers and say, “I can see how to grow based on which product is profitable. All of these other SKUs are just creating drag.”
That’s wisdom, not just more data.
Start With One Question
You don’t have to become an accountant to take control of your business.
Just start with one question: which of your products actually makes money after every cost?
If you don’t know yet, that’s okay. Most owners don’t.
I’d love to know what line on the P&L confuses everyone the most so please hit reply and let me know.
It might be common enough that it becomes a future email.
Cyndi
Quick Summary
- Profit and cash flow tell different stories, so your P&L and bank account often won’t match.
- Inventory cash leaves your bank right away but only hits the P&L when the product sells, sometimes months later.
- Loan payments and owner draws live on the balance sheet, not the P&L.
- Amazon payout holds can tie up cash even when your business is profitable on paper.
- Ron Baker’s second sphere of flourishing is wisdom and understanding: helping owners think clearly about cash.
- Your Profit Team starts with cash runway and unit economics instead of the P&L.
- First step: find out which of your products actually make money after every cost.
Frequently Asked Questions
What is the difference between profit and cash flow?
Profit is what your P&L shows after matching revenue with the costs of the products you sold. Cash flow is the actual money moving in and out of your bank account. Timing differences, like paying for inventory before it sells, mean you can be profitable on paper and still short on cash.
Why doesn’t my P&L match my bank account?
Inventory purchases leave your bank right away but don’t hit the P&L until the product sells. Loan payments and owner draws don’t appear on the P&L at all, and marketplaces like Amazon hold your money before paying you out. All of these create a gap between profit and cash.
Where do loan payments and owner draws show up?
They live on the balance sheet, not the P&L. That’s why they can drain your bank account without changing your reported profit.
What is cash runway?
Cash runway is how long your current cash will last based on what’s coming in and going out. It answers a simple question: how many weeks or months can the business keep operating before cash runs out?
What are unit economics for an ecommerce business?
Unit economics show what each product actually leaves you after every cost, including platform fees, ad spend, and fulfillment. Looking at product-level numbers shows which SKUs drive profit and which ones create drag.
Related reading: Health and Wellbeing · Why Don’t You Open Your P&L? · Which Products to Cut: A Product Profitability Framework · How Do I Identify Real Profit Versus What Just Looks Profitable?
Want to see which of your products actually make money? Book a discovery call with Your Profit Team.
