You had a profitable year. Your P&L looks solid. But when you check your bank account, there's barely enough to cover payroll next week.
How is it possible to run a profitable business and still feel broke? Why does your P&L say one thing while your bank account says another?
If you've ever felt that gut-punch of confusion, wondering why your "successful" business feels broke, you're dealing with a cashflow problem.
This is the single most stressful financial issue business owners face. It keeps you up at night, makes you question your decisions, and leaves you feeling completely out of control.
At Patrick Accounting, we've helped hundreds of small business owners finally get control of their cash. In this article, we’ll walk you through the exact steps to finally get control of your cashflow using the Profit First system. You'll learn:
- What cashflow really means (and where most owners get confused)
- The five-account system that gives you clarity
- How to plan 8-12 quarters ahead for financial stability
- Quick wins for getting paid faster and controlling spending
What Cashflow Actually Means
Let's start with the basics. Cashflow is simply money in vs. money out. Every dollar that comes into your business, every dollar that leaves—that's your cashflow.
Here’s where it gets tricky, though: Cashflow has nothing to do with profit on your Profit & Loss statement. Your P&L might show you made $200,000 this year, but that doesn't mean you have $200,000 sitting in your bank account. Why? Because profit doesn't account for things like:
- Loan payments (principal doesn't show up on your P&L)
- Owner draws and distributions
- Inventory purchases or equipment you bought
- Money customers owe you but haven't paid yet
- Timing differences between when you earned revenue and when you actually collected it
So, you can be "profitable" on paper while simultaneously scrambling to make payroll. That's the disconnect that creates so much stress.
Why Your Business Keeps Running Out of Cash
This is what we refer to as the "spending the same dollar four times" problem. And it's one of the biggest cashflow traps we see.
So, what do I mean?
Well, it happens like this: You see $20,000 in your checking account.
You think, "Great! I can use that for the new marketing campaign."
But you've also committed that money to next week's payroll.
And you owe a quarterly tax payment.
And you promised yourself you'd finally take a decent paycheck this month.
You've just spent that $20,000 four different ways, but you can only spend it once.
This is where the abundance mindset backfires. Many business owners think, "If I need more money, I'll just work harder and bring in another deal."
Unfortunately, that's not a cashflow plan. It’s hope. And hope doesn't pay the bills when three financial commitments all come due in the same week.
The Biggest Cashflow Mistakes Small Business Owners Make
Before we get into solutions, let's call out the most common mistakes:
1. Treating every dollar in the bank as "spendable money"
Just because it's there doesn't mean it's available. Some of that money is already committed to taxes, payroll, or other obligations.
2. No system for allocating money to specific purposes
Without designated accounts or buckets, it all blends together into one confusing pile of cash.
3. Failing to plan for taxes, seasonal dips, and capital expenses
If you're not proactively saving for these known expenses, they'll always feel like emergencies.
4. Slow collections and disorganized billing practices
The longer it takes to get paid, the longer you're operating on borrowed time (or borrowed money).
How Profit First Solves the Cashflow Chaos
Now, let’s look at the solution.
You need a system that tells every dollar where to go before you're tempted to spend it. And that's where the Profit First framework comes in.
Profit First uses a simple concept: Work off smaller plates. When you eat off a smaller plate, you eat less. When your operating expense account has less money in it, you spend less. It forces discipline and intentionality.
Instead of one big checking account where all your money lives, you create multiple accounts, each with a specific purpose. Every time money comes in, you immediately allocate percentages to each account based on priorities.
The 5 Accounts Every Business Needs for Cashflow Control
Here are the five accounts you should set up:
1. Income Account
This is where all revenue lands first. Every payment, every deposit. It all goes here. But money doesn't stay here long. This is just the distribution hub.
2. Profit Account
Yes, you take profit first, not last. Even if it's just 1% of every sale, this money is untouchable. It's your reward for taking the risk of business ownership.
3. Owner's Pay Account
This is your actual salary—the money you take home to pay your mortgage and feed your family. This is not the same as profit. Profit is what you earn as the owner of the business. Owner's pay is what you earn as an employee doing the work.
4. Tax Account
Every time revenue comes in, a percentage goes here. Start with at least 1% if you're just getting started, then adjust based on your actual tax liability. No more surprise tax bills.
5. Operating Expenses Account
This is what's left after you've allocated to the other four accounts. This is the money you use to run your business. Money for payroll, rent, software, supplies, everything.
The brilliance of this system is that you can only spend what's actually in your operating expense account. If it's not there, you can't spend it. It forces you to make decisions with a smaller plate.
How to Plan Your Cashflow 8-12 Quarters Ahead
When we talk about cashflow management, we aren’t just talking about this week or this month. We’re talking about having a long-term view.
Let's say you know you'll need to remodel your office space in 18 months. Or you're planning a big marketing push next year. Or you want to buy new equipment. Start saving for it now by creating a designated reserve within your operating expenses or profit accounts.
Think about your business in terms of 8-12 quarters.
- What big expenses are coming?
- What opportunities might arise?
- How will seasonal fluctuations affect your cash?
For example, if you're a restaurant owner, you might have slower months in January and February. Plan for that during your busy summer months by increasing your reserves. Don't spend abundant cash like it'll last forever… because it won't.
Quick Wins for Accelerating Cash Into Your Business
If you want to improve cashflow immediately, you need to get paid faster.
Here's how:
- Invoice the moment work is completed, not days or weeks later.
- Require 50% deposits upfront on new projects or jobs.
- Shorten payment terms from net 30 to net 10 (or even net 0).
- Automate payment collection so you're not chasing down late invoices.
- Reduce the days between invoice and payment through systematic follow-up.
The faster money comes in, the more predictable your revenue becomes. And the less you'll worry about having enough cash on hand.
Quick Wins for Controlling Cash Going Out of Your Business
On the flip side, you also need to understand exactly where your money is going.
Start by auditing your expenses:
- Do you have recurring subscriptions you forgot about?
- Are you paying for duplicate software that does the same thing?
- Have you set aside money for taxes, or are you hoping it'll just work out?
Once you have clarity on where the cash is actually going, you can make intentional decisions about what stays and what goes. You can't manage what you don't measure.
Once you’ve tightened spending, the next challenge is riding out the seasonal highs and lows many businesses face.
Managing Cashflow Through Seasonal Fluctuations
If your business has seasonal ups and downs (and most do, percentage-based management becomes your lifeline.
During high-revenue months, your percentages stay the same (let's say 5% to profit, 15% to taxes, 30% to owner's pay, and 50% to operating expenses). But because revenue is higher, the actual dollar amounts going into each account are larger. That's when you build reserves.
During slower months, the percentages stay the same, but the dollar amounts are smaller. That's OK because you've already built up reserves during the good times.
This system smooths out the peaks and valleys so you're not living paycheck to paycheck as a business owner.
Take Control of Your Cashflow and Your Sanity
What many business owners perceive as a revenue problem is usually just a cashflow management problem. The good news about that? Cashflow is just a math equation.
And that means it's solvable.
When you have a system that shows you exactly where every dollar is going and why, you stop feeling out of control and the panic starts to fade.
You start making confident decisions because you actually understand your business's financial reality.
At Patrick Accounting, we've helped hundreds of small business owners implement proven systems like Profit First to bring order to their finances and peace of mind to their lives.
You didn't start your business to live in constant financial anxiety, where you feel broke and overwhelmed. You started it to build something great, and that starts with getting control of your cash.
If you're ready to stop guessing and start managing your cashflow with confidence… and finally build a thriving business, let's talk.
But what does thriving actually mean for your business?
To dig deeper into that question, check out our article: “What It Really Means for Your Business to Thrive… and How to Get There.”
