Why Your Profits Don’t Match What’s in Your Bank Account

You’ve probably run into this before: your profit and loss statement shows a solid profit, but your bank account is telling a completely different story.

If that feels familiar—you’re not alone.

This happens to a lot of business owners. And it’s usually because of cash flow.

Cash flow is simply the movement of money coming into your business and going out. Your P&L shows how profitable you are on paper, but cash flow shows what’s actually in your bank right now.

1. Credit Card Spending

When you use your business credit card, the expense hits your P&L immediately.
But the cash doesn’t leave your bank until you pay the credit card bill—sometimes weeks later.

2. Paying Yourself (Sole Proprietors + Corporations)

Sole Proprietors: Paying yourself is an owner’s draw. It lowers your bank balance but never shows as an expense on your P&L.

Corporations:

• Salary: Shows up as an expense and reduces profit.
• Dividends: Do not show as an expense. They’re paid out of retained earnings (what the business keeps).
• Shareholder Loan Withdrawals: Reduce cash but don’t affect your P&L. This tracks the money you take out of the corporation.

3. Equipment + Asset Purchases

Bigger purchases like computers, tools, or equipment pull cash from your bank right away.
But they’re recorded as assets—not regular expenses on your P&L.

4. Loan + Financing Activity

Loan payments, tax  instalments, sales tax payments, and other financial movements impact your bank balance. But they usually don’t affect your profit and loss (aside from interest).

Why Cash Flow Actually Matters

This isn’t just accounting jargon.

Understanding your cash flow helps you:

• Plan for tax instalments
• Predict upcoming cash needs
• Avoid cash shortages
• Make confident financial decisions

Pro Tip: Work with a Professional

Every business has its own cash flow rhythm and government tax rules add their own quirks.

A bookkeeper who understands salary, dividends, shareholder loans, and asset purchases in Canada can give you clear, accurate guidance.

Profits matter. But cash is what keeps your business running.

When you understand the difference, you’re already on your way to a more confident, financially grounded business.

Thank you for reading!

Curious how you can get support from a professional bookkeeper? Check out our boutique bookkeeping services for female entrepreneurs on our Services page.