{"version":"1.9","identifier":"ca11718b-a5fd-4e2b-9a5a-1995c18662b4","language":"en-US","title":"A profitable company can still be short of cash: follow the unpaid invoices","layout":{"columns":7,"width":1024,"margin":32,"gutter":20},"componentLayouts":{"text":{"columnStart":0,"columnSpan":7,"maximumContentWidth":720,"margin":{"top":12,"bottom":12}},"photo":{"columnStart":0,"columnSpan":7,"margin":{"top":20,"bottom":20}}},"componentTextStyles":{"default":{"fontName":"HelveticaNeue","fontSize":18,"lineHeight":29,"textColor":"#171717"},"headline":{"fontName":"HelveticaNeue-Bold","fontSize":36,"lineHeight":42,"conditional":[{"conditions":{"maxViewportWidth":480},"fontSize":28,"lineHeight":34}]},"intro":{"fontName":"HelveticaNeue","fontSize":20,"lineHeight":28,"textColor":"#555555"},"caption":{"fontName":"HelveticaNeue","fontSize":13,"lineHeight":19,"textColor":"#666666"},"byline":{"fontName":"HelveticaNeue","fontSize":13,"lineHeight":20,"textColor":"#666666"},"body":{"fontName":"HelveticaNeue","fontSize":18,"lineHeight":29,"paragraphSpacingAfter":14,"linkStyle":{"textColor":"#00704a"}}},"metadata":{"contentGenerationType":"AI","canonicalURL":"https://567business.com/news/profit-cash-flow-receivables-working-capital-guide","datePublished":"2026-11-12T20:06:25.812414Z","dateModified":"2026-11-12T20:06:25.812414Z","authors":["567 Business"],"excerpt":"Profit records economic performance; cash flow records money moving. A simplified example shows how customer payment timing creates a gap.","thumbnailURL":"https://pub-fac99da959e344fe99d810d309cef7df.r2.dev/photos/article/ca11718b-a5fd-4e2b-9a5a-1995c18662b4/c8fbd6bd8ae4d9a5bdca62e7530e7478.jpg","keywords":["markets"],"generatorName":"Frog News","generatorVersion":"1.0"},"components":[{"role":"title","text":"A profitable company can still be short of cash: follow the unpaid invoices","textStyle":"headline","layout":"text"},{"role":"intro","text":"Profit records economic performance; cash flow records money moving. A simplified example shows how customer payment timing creates a gap.","textStyle":"intro","layout":"text"},{"role":"byline","text":"By 567 Business · AI-generated · Published November 12, 2026","textStyle":"byline","layout":"text"},{"role":"photo","URL":"https://pub-fac99da959e344fe99d810d309cef7df.r2.dev/photos/article/ca11718b-a5fd-4e2b-9a5a-1995c18662b4/c8fbd6bd8ae4d9a5bdca62e7530e7478.jpg","caption":"The New York Stock Exchange facade in June 2024. Illustrative market photograph, not a record of today's trading. Photo: Ryan Schwark, CC0 via Wikimedia Commons. Cropped for display. · Ryan Schwark / Wikimedia Commons (CC0 1.0)","accessibilityCaption":"The New York Stock Exchange facade in June 2024. Illustrative market photograph, not a record of today's trading. Photo: Ryan Schwark, CC0 via Wikimedia Commons. Cropped for display.","layout":"photo"},{"role":"caption","text":"The New York Stock Exchange facade in June 2024. Illustrative market photograph, not a record of today's trading. Photo: Ryan Schwark, CC0 via Wikimedia Commons. Cropped for display. · Ryan Schwark / Wikimedia Commons (CC0 1.0)","textStyle":"caption","layout":"text"},{"role":"body","format":"markdown","text":"A company can earn a profit and still struggle to pay its bills on time. One reason is simple: some customers have not paid yet. Revenue and cash receipts do not always arrive in the same reporting period, so net income alone cannot show whether the business has enough money available.\n\nThe SEC's [financial-statement guide](https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements) explains that the cash-flow statement connects reported profit with cash generated or used. Under the indirect method, it adjusts net income for noncash items and changes in operating assets and liabilities.\n\n## A sale can precede the payment\n\nImagine a fictional service business that earns $100,000 in revenue during a month. Assume all the work qualifies for revenue recognition, and its expenses are $80,000, all paid in cash. Its accounting profit is $20,000.\n\nNow assume customers pay only $70,000 of those invoices during the month. The remaining $30,000 is still owed. With no other cash flows, the business has received $70,000 and spent $80,000, so its cash falls by $10,000.\n\nThe example deliberately leaves out taxes, depreciation and other complications. It isolates payment timing. The business did not need to report a loss for cash to decline.\n\n**Hypothetical profit and cash can point in different directions**\n\nSimplified fictional month. All expenses are cash-paid, with no other transactions.","textStyle":"body","layout":"text"},{"role":"htmltable","html":"<table><tr><th>Measure</th><th>Amount</th></tr><tr><td>Revenue earned</td><td>$100,000</td></tr><tr><td>Cash collected</td><td>$70,000</td></tr><tr><td>Expenses paid</td><td>$80,000</td></tr><tr><td>Accounting profit</td><td>$20,000</td></tr><tr><td>Net cash movement</td><td>−$10,000</td></tr></table>","layout":"text"},{"role":"body","format":"markdown","text":"Source: [Original example based on the SEC's cash-flow explanation](https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements)\n\nIf the remaining invoices are collected next month, cash may recover. If customers cannot pay, the problem is more serious. The same initial gap can therefore reflect ordinary timing or a worsening collection issue.\n\n## Look at receivables in context\n\nAccounts receivable represent amounts owed by customers. Growth in that balance can be normal when sales expand. It deserves closer attention when it rises faster than the business or remains elevated across several periods.\n\nRead management's explanation and the notes about credit losses and payment terms. A single quarter is rarely enough to establish that collections are healthy or deteriorating.\n\nThe question is also different for a company paid before delivery. Advance cash can improve the bank balance while leaving a future obligation to provide goods or services. Cash received is not automatically revenue earned.\n\n## Separate the three cash-flow sections\n\nOperating cash flow concerns the business's operating activity. Investing cash flow includes items such as purchases of long-lived equipment. Financing cash flow includes borrowing, debt repayment and transactions with capital providers.\n\nA rising cash balance can therefore come from a new loan rather than better operations. Likewise, cash can decline because a company bought equipment, even if the operating business generated money.\n\nStart with the source of the movement. The total change in cash is useful, but the sections explain why it happened.\n\n## Read several periods together\n\nSeasonality and payment dates can make one period unusually strong or weak. Compare similar periods and review a longer span before drawing a broad conclusion.\n\nAlso connect the cash-flow statement to the balance sheet. Debt coming due, available cash and customer balances help show how much flexibility the company has.\n\nA profitable income statement answers whether recognized revenue exceeded recognized costs. It does not answer every question about liquidity. Following the invoices and the cash-flow categories helps explain how a company can report earnings while still needing money to keep operating.","textStyle":"body","layout":"text"}]}