"We're profitable — we just have no cash." This is the most common and most confusing state for a small store. Profit is an accounting view; cash is what pays tomorrow's rent. They diverge for predictable reasons.
Six reasons a profitable store is cash-poor
| Culprit | What happens |
|---|---|
| Collected sales tax spent | You collected tax from customers but used it for operations. It is pass-through and must be remitted — a hidden hole. |
| Employer payroll tax ignored | Wages are not the full cost. FICA, SUTA, FUTA, and workers' comp add ~15-25% you owe but have not paid. |
| Inventory paid before revenue | You outlay cash for stock 30-60 days before it sells, so cash lags profit. |
| Owner draw not modeled | "Profitable without my salary" is not sustainable; your draw is a real cash outflow. |
| Slow ramp timing | Early months burn cash faster than the average model implies. |
| Overbuying / discounting | Cash tied in dead stock or margin given away in promotions. |
Accrual vs cash, in one line
Your P&L counts revenue when earned and costs when incurred. Your bank counts cash when it moves. The gap between those two timelines is your cash problem.
Open a separate sales-tax account: Sweep the tax portion of every sale the day it lands. You will stop accidentally spending money that was never yours.
What "healthy" looks like
A store that survives has positive true net and a cash buffer of 3-6 months of operating cost, with break-even revenue comfortably below actual sales. If any of those is missing, the Store Health Check shows exactly which, and the Ramp-Up tool shows when cash recovers.
Do not confuse tax due with profit: Money sitting in the bank that is owed for payroll tax or sales tax is not yours to spend. Treat it as already gone.