The Crucial Difference Between Money in the Bank and Profit
Why Every Business Owner Needs to Know the Truth Behind the Numbers
Running a business successfully means understanding the numbers — but too many business owners confuse money in the bank with profit. They are not the same thing, and mistaking one for the other can lead to poor decisions, missed opportunities, and even financial disaster.
At Business Coaching Manchester, we’ve worked with hundreds of business owners who were growing fast, turning over impressive sales — but still struggling to make ends meet. Often, the root of the problem comes down to this misunderstanding.
What is Profit?
Profit is what’s left over after you subtract all of your business expenses from your revenue.
There are different types of profit:
- Gross profit: Revenue minus the cost of goods sold (COGS).
- Operating profit: Gross profit minus operating expenses.
- Net profit: What’s left after all expenses — including taxes, wages, rent, marketing, interest — are deducted.
Profit is a calculated figure based on your accounting, and it tells you whether your business is actually financially viable and sustainable.
What is Money in the Bank?
Money in the bank is the actual cash you have available right now — also called cash flow. It reflects your liquidity, not your profitability.
You could have £50,000 in the bank today, but still be losing money every month. Why? Because that cash might be leftover from a busy period, or a loan, or delayed payments to suppliers. Equally, your business could be profitable on paper, but with little or no money in the bank due to slow-paying clients or high upfront costs.
Why the Difference Matters
Here’s what can happen when you confuse the two:
- You hire more staff or increase marketing based on a healthy bank balance — not realising your business is operating at a loss.
- You panic during a cash-poor month, even though your business is profitable and the cash is simply delayed.
- You make big decisions without understanding how sustainable your finances really are.
Profit Without Cash = Trouble
You may be owed money, but until it’s in the bank, you can’t use it to pay staff, suppliers or yourself.
Cash Without Profit = A Trap
Just because you have cash doesn’t mean you’re making money. Once the cash runs out, you’ll be in trouble — unless you fix your business model.
What To Do
- Track both your cash flow and your profit monthly. Don’t rely on your bank balance to judge success.
- Work with a coach or accountant who can show you real-time numbers — and what they mean.
- Use forecasting tools to anticipate both cash flow and profit trends.
- Make decisions based on long-term financial health, not short-term cash.
Need Clarity? We Can Help.
At Business Coaching Manchester, we help business owners take control of their numbers so they can grow with confidence. If you’re unsure whether you’re truly profitable — or just surviving on cash — let’s talk. The first step is understanding the numbers. The second is using them to build a better business.
Call 0161-881 2212 and we’ll help you decode the numbers that matter.