A Clear Results client, a concrete contractor, closed January with $134,000 of profit and $17,000 less cash in the bank. Profit measures what a business earned; cash measures what reached the bank. These splits come from 5 recurring causes, and Clear Results installs a system for each.
| # | Reason | The system Clear Results installs |
|---|---|---|
| 1 | Unpaid invoices tie up the profit | A weekly receivables aging report and a bill-on-completion rule |
| 2 | Loan principal never appears on the P&L | A monthly debt line that converts profit into cash |
| 3 | Taxes and draws leave the bank with no P&L expense | A free-cash line that counts draws, loan payments, and tax |
| 4 | Financed sales pay out weeks later | Collected cash tracked weekly, with a cash-neutral sales target |
| 5 | Bulk material orders use up cash before jobs pay | A pre-buy cash check and a standby bank line |
Reason 1 of 5
A business records revenue when it finishes the work, and it gets the cash when the customer pays. When one customer accounts for most of a month's revenue, the bank balance depends on when that customer pays. Stuart Trier of Clear Results put it to the owner in one line: "You made the money, but you hadn't collected at all."
If the books show a profit and the bank balance still fell, compare receivables on this month's balance sheet with last month's. A jump there is the first thing to rule out.
Clear Results helps the owner in 4 steps:
One more catch from the same review: a monthly depreciation entry looked too high for the equipment the business owns, and Stuart told the owner to take that question to the accountant.
Go deeper: how 7.8 days of net working capital released $478,000
Reason 2 of 5
Each payment on those loans covers interest and principal. Interest is an expense on the P&L. Principal only pays down the loan balance and never reduces profit, so a business can post a healthy profit while its bank balance keeps dropping.
Add up every loan and vehicle payment for a month, then subtract the total from profit. If the result is close to the change in cash, principal is the cause.
Clear Results helps the owner in 4 steps:
So when you see 30k in profit, you'll know it's going to be 24 in cash.
Stuart Trier, Clear Results, coaching the waterproofing client's owner.
Go deeper: how loan principal hides on a profit and loss statement
Reason 3 of 5
The business pays estimated taxes and owner draws out of its bank account. Neither shows as an expense on the P&L. The owner also owes tax on the full profit, including the portion already used for vehicle payments and equipment loans. Stuart told the crawl space owner exactly that: he was paying tax on money he never saw in the account.
Profit is positive, and the account is thin, but no expense on the P&L explains the drop. Add up the quarter's owner draws, estimated tax payments, and loan payments, then compare the sum with the quarter's profit.
Clear Results helps the owner in 3 steps:
That free-cash line used an estimate. The owner had already taken $50,000 out for tax prepayments, and the final tax bill could not be known until August's books closed.
Reason 4 of 5
Financed jobs pay slowly. First, the business pays for the lead. The appointment comes 3 to 5 days later, and when the customer says yes, they put down a 10% deposit. Then the job waits up to 3 weeks for financing approval and about 8 more for the install, and only after that does the balance arrive. At this client the cash came in roughly 9 weeks after the costs went out, with about half the jobs adding a 5-day bank delay on top. One summer week, the business collected just $4,000 and still had to cover that week's expenses.
Each added sale means paying for another lead and another crew weeks before the money comes back.
Is the cash you collect keeping up with the work you produce? At this client, the answer was no. Lining up a month's cash collected with sales and production showed why. In a month when the business collected under 50% of what it produced, its cash went negative.
Clear Results helps the owner in 4 steps:
That target is a simple model Stuart built (a fixed 50% collection rate and 1 month's cost base). The weekly collected-cash figure replaces it as real data comes in.
Business can only grow as fast as the cash flow will allow.
Stuart Trier, Clear Results, to the client's leadership team.
Reason 5 of 5
A business that buys material for future jobs pays for it weeks before those jobs pay. On the day of the purchase, the bank balance drops. Stuart showed one crawl space owner how this works on the balance sheet. Growing receivables and growing inventory both take cash out of the business, and unpaid supplier bills (accounts payable) offset part of it.
Your bank balance falls right after a large purchase order, and the jobs that order supplies are still weeks from paying.
Clear Results helps the owner in 4 steps:
Stuart asked these questions after the owner had decided on the order, so the recovery to $150,000 depends on the $82,000 arriving on time.
Across the 5 reasons, the same 3 types recur: cash earned but not collected, cash spent without touching profit, and a shortage seen too late to act on. Clear Results installs one system for each type, and the table shows which reasons belong to which type.
| Type | Reasons | What the owner sees | The system Clear Results installs |
|---|---|---|---|
| Earned but not collected | 1 and 4 | Receivables rise while the bank balance falls | Net working capital days tracked weekly, a billing rule, and collected cash on the scorecard |
| Spent but never on the P&L | 2, 3, and 5 | Cash falls after loan payments, taxes, draws, or inventory buys that never show as expenses | A monthly bridge from profit to cash |
| Seen too late | All 5 | The owner finds out when payroll or a supplier bill comes due | A true cash balance on the weekly scorecard, a 1-month reserve floor, and a standby bank line |
In reasons 1 and 4, the business books revenue before the cash arrives. Net working capital days measure the time from paying costs to getting paid. Clear Results builds the billing rule and aging report (reason 1) and the collected-cash line (reason 4) to shorten it.
The electrical contractor from reason 1 had $200 in the bank the week a $10,600 payroll bounced. The audit that followed showed where $478,000 of cash was stuck.
Principal, taxes, owner draws, and inventory all come out of cash, and none of them appears as an expense. Each month, Clear Results puts all 4 on one page: the month's profit, minus those 4 items, equals the month's cash result. The owner compares that figure with the actual change in the bank balance and takes any remaining difference to the accountant as a question.
In the crawl space example, working cash fell from $165,000 to $126,000 after the draw and truck payments. A planned inventory build for growth would take about $20,000 more.
In all 5 reasons, the owner finds out late, when payroll or a supplier bill comes due. Home service coaching engagements typically review profit monthly. On the weekly scorecard, Clear Results adds a true cash balance, so the owner sees a drop in the week it starts.
The second part is the reserve: the owner holds back cash before spending the rest, with a standby bank line of about $50,000 as backup.
Answer each question yes or no, then count your yes answers.
0 to 1 yes: Profit and cash probably rise and fall together. Even so, a weekly cash balance would show a change early.
2 to 3 yes: Start with the reasons you ticked and use the system described under each. After that, the monthly profit-to-cash bridge shows what principal, taxes, draws, and inventory take out of cash.
4 or more yes: Profit is reaching your bank account slowly. Take the Value Gap Scorecard to see which constraint to address first.
This week, pull the receivables aging report plus a list of every loan and vehicle payment. Next month, build the profit-to-cash bridge for the month just closed and compare it with the bank balance.
After that, put the bank balance on the weekly scorecard and start funding the reserve. One rule for the order: when one customer owes a large balance, reason 1 comes first. Otherwise, begin with reason 2.
Compare 3 months of profit with the change in cash over the same 3 months. Then subtract these items, in this order: the increase in receivables, principal payments, draws and estimated taxes, and inventory growth. Start with receivables, because the aging report confirms them on one sheet. Whatever is left usually comes from timing in the sales cycle, such as financing approvals and deposits. The January example from reason 1 shows the method. Profit was $134,000, and cash fell $17,000, which left $151,000 to explain. The $120,000 in receivables plus $34,000 of retirement contributions covered it, give or take a few thousand dollars of smaller items.
At Clear Results, the minimum is 1 month of operating expenses. Two months is best practice, Stuart says, and 3 months is fully cashed up, because that much cash lets an owner buy a discounted truck from a seller in a hurry. The reserve also has to grow with the business: a $10,000 to $15,000 swing is easy to absorb at one size, and a $50,000 to $100,000 swing needs a larger reserve.
A bank line covers gaps in cash timing, and the owner should never need to draw on it. Stuart asked one owner to arrange about $50,000, because holding a line costs about 7% a year. An advance quoted at 18% and repaid in about 4 months works out to roughly 54% a year, so a standby line spares the owner that cost.
Yes. Where a typical home service coaching program checks in once a month, Stuart starts from the owner's own cash statements and reads them one line at a time. One review found 2 truck payments from February that the accountant had left out.
Stuart Trier is the Founder and CEO of Clear Results. Over the past 20 years, Stuart has built, bought, and sold 11 companies across the home service, healthcare, and marketing industries. He built his first company from startup to $8M in revenue in 3 years before a successful exit, then built a chain of 28 healthcare clinics and sold the business to a publicly traded company. Following that acquisition, Stuart spent 3 years working alongside the CEO, helping lead the organization through a take-private transaction before participating in a nine-figure exit to a Fortune 10 company. Today, he's the lead investor behind an electrical services platform operating across 3 U.S. states, and has worked directly with owners through 1,800+ strategic advisory sessions.
Revenue is up. Cash is tight. Your P&L says one thing and your bank account says another, and net working capital days is the number that explains the gap and determines when profit actually becomes spendable cash.
A $4.7 million electrical contractor kept showing solid profit on paper while payroll week turned into a scramble for cash. A single working capital audit found $478,000 tied up in receivables and inventory — more than the $324,000 his P&L had reported as profit.
A foundation repair company nearing $1.3M in revenue paid its owner less than some of his crew, until Clear Results fixed the pay.
