Profit & Loss vs Cash Flow
Two views of the same business, why they disagree, and why buying stock is not a loss.
The Financial Report shows your business two ways, and they will not agree. That is not a bug — it is the point. A profitable month can drain your bank account, and a month with barely any work can leave you flush. You need to see both.
1. Profit & Loss — are you making money?
Sales − Material Used − Waste = Gross ProfitGross Profit − Operating Expenses = Net Profit
| Line | What it is |
|---|---|
| Sales | Value of jobs completed or delivered in the period |
| Material Used | What those jobs actually consumed, from each job's cost record |
| Waste | Spoilage logged against those jobs |
| Operating Expenses | Paid expenses — rent, wages, utilities |
Buying stock is not a loss — using it is
Material Used is what jobs consumed, never what you bought. Buy twenty reams and you have swapped cash for paper; you are no poorer, just less liquid. The cost arrives when the paper goes through the press. This is why purchase orders never appear in Profit & Loss — it is the same treatment every serious accounting system uses.
2. Cash Flow — where did the money go?
Cash In − Cash Out = Net Cash
| Direction | Includes |
|---|---|
| In | Money received from sales |
| Out | Completed purchase orders, plus paid operating expenses |
A dated, signed movement log sits behind this view, so every figure can be traced to the sale, purchase or expense that caused it.
Which line goes where
| Event | Profit & Loss | Cash Flow |
|---|---|---|
| You buy 20 reams of paper | No effect | Cash out |
| A job consumes 5 of them | Material cost | No effect |
| You complete a customer's job | Sales | Cash in |
| You pay the rent | Expense | Cash out |
| You log a paper jam | Waste | No effect |
| A recurring bill falls due, unpaid | No effect | No effect |
Operating expenses are the only line in both
Paying rent reduces profit and reduces cash simultaneously. Purchases hit cash only; material consumption and waste hit profit only.
Reading the two together
- Profitable but cash is tight — you have bought stock faster than you are using it, or customers have not paid yet.
- Cash healthy but profit thin — you are running down stock you bought earlier. Pleasant now, but the reordering bill is coming.
- Both negative — expenses are outrunning the work. Check the expense breakdown before the sales figure.
- Gross profit fine, net profit poor — the jobs are priced right; the overheads are the problem.
Keeping it accurate
The report is only as honest as what feeds it. Three things matter most:
- Mark jobs done. A job left in production contributes no sale and no cost.
- Give every product a recipe. Without one a job costs nothing and looks perfectly profitable — see Building a product recipe.
- Record expenses. Missing overheads inflate net profit directly.
Jobs created at the counter appear as walk-in trade rather than against a named customer, and a sale is dated by when the job finished.
Open the Financial Report
Related guides
Tracking expenses
One-off and recurring costs, due dates, and marking a recurring expense as paid.
Sales and inventory reports
Period presets, what counts as a sale, and how to read the inventory report.
Cost, price and margin on a product
How the product page works out unit cost from the recipe, and what the margin figure means.