Your Business Is Making Sales. So Why Is There Never Enough Cash?
You had a good month.
Sales reached GHS 300,000.
Orders are coming in. Customers seem happy. Your sales team says business is improving.
Then payroll is due.
A supplier wants GHS 45,000.
VAT and other payments are coming up.
You need another GHS 60,000 to restock.
You check the bank account and suddenly ask the question many business owners eventually ask:
Where did all the money go?
The answer may be uncomfortable.
Your business can make sales. It can even make a profit.
And still not have enough cash.
Those three things are not the same.
Once you understand where the difference comes from, you can stop guessing and start looking at the numbers that actually explain what is happening.
Sales are not cash
Suppose you sell GHS 100,000 worth of goods this month.
That sounds good.
But what if only GHS 55,000 has actually been paid?
The other GHS 45,000 is still with your customers.
Your sales report can still show GHS 100,000.
But you cannot pay salaries with GHS 45,000 sitting on customer invoices.
You cannot restock with it.
You cannot pay a supplier with it.
And you cannot use it to pay taxes until the actual cash arrives.
This is the first place many business owners should look when sales are strong but cash is tight.
Ask:
How much money do customers owe your business right now?
Then ask the more important question:
How old is that debt?
GHS 200,000 owed for seven days is very different from GHS 200,000 that has been outstanding for 90 days.
The sale has happened.
The cash has not.
Your customers may be using your money
Imagine your company normally gives customers 30 days to pay.
But in practice, they take 60 days.
You pay employees this month.
You pay suppliers this month.
You pay transport costs this month.
You may even pay for another customer’s order this month.
But the customer pays you next month.
Who financed that gap?
You did.
Your business is effectively using its own cash to finance the customer.
Now imagine this happening across ten, twenty or fifty customers.
A company can appear extremely busy while slowly starving itself of cash.
This is why customer credit should never be treated as only a sales decision.
It is also a financing decision.
Every time you tell a customer, “Pay me later,” you should know how your business will survive until later arrives.
Then there is money sitting on your shelves
Customers are not the only place cash gets trapped.
Look at your stock.
Suppose your business has GHS 400,000 worth of inventory.
That sounds like an asset.
And it is.
But perhaps GHS 120,000 of that stock has not moved for four months.
Your business has already paid for it.
The money has left the bank.
But until someone buys that stock, you cannot use the GHS 120,000 to pay salaries, fuel a vehicle or settle a supplier.
The money has simply changed form.
It used to be cash.
Now it is stock.
This becomes dangerous when business owners keep buying because the warehouse looks busy rather than because stock is actually moving.
The question is not only:
How much stock do we have?
Ask:
How much of it are we actually selling?
A warehouse full of products can hide a serious cash problem.
Growth can make the problem worse
This is where things become counterintuitive.
When cash becomes tight, many owners immediately think:
“We need more sales.”
Sometimes that is exactly the wrong response.
Consider a distributor.
Each GHS 100,000 of additional sales requires:
GHS 65,000 of stock.
GHS 5,000 of transport and handling.
GHS 3,000 of commissions and other direct costs.
Customers then receive 45 days to pay.
The company may have to spend more than GHS 70,000 before collecting most of the GHS 100,000 sale.
Now double sales.
Good news?
Eventually, perhaps.
But in the short term, the company may need twice as much cash to finance the extra business.
This is why fast-growing companies can experience severe cash pressure.
More orders require more stock.
More production requires more materials.
More customers may create more unpaid invoices.
More employees may be hired.
More vehicles may be needed.
More branches may require deposits, furniture and equipment.
Growth starts consuming cash before it begins producing enough additional cash.
So the question is not simply:
“Can we sell more?”
It is:
“Can we afford to finance the extra sales until the cash comes back?”
That is a very different question.
Profit is not the amount sitting in your bank account
This is another source of confusion.
Your accountant may tell you:
“The company made GHS 250,000 profit this year.”
You then look at your account and see GHS 60,000.
Nobody necessarily made a mistake.
Profit and cash answer different questions.
Profit tells you whether revenue was higher than the expenses used to generate it during a period.
Cash tells you what money is actually available.
A proper cash flow statement therefore looks separately at cash generated or used by operating activities, investing activities and financing activities. That distinction is part of the international accounting framework for cash flow reporting. (IFRS Foundation)
And this explains several places where the “missing” profit may have gone.
You may have bought assets with it
Suppose your company makes GHS 200,000 profit.
During the same year, you buy a vehicle for GHS 150,000.
The vehicle has value.
Your business did not simply “lose” GHS 150,000.
But the cash has left your bank account.
You now have a vehicle instead.
The same applies when you buy:
machinery,
computers,
office furniture,
production equipment,
land,
or other major assets.
You may therefore have a profitable business with very little cash because some of the cash has been turned into assets.
That is not necessarily bad.
The question is whether those assets were worth buying and whether the business retained enough cash after buying them.
Loan repayments can quietly drain cash
Suppose your company borrowed money to finance expansion.
You now pay GHS 20,000 every month toward the loan.
Part of that payment may reduce the amount you owe rather than appear as a normal operating expense in the same way salaries or rent do.
But your bank account does not care about accounting classifications.
GHS 20,000 still leaves.
Over twelve months, that is GHS 240,000 of cash.
A business owner who looks only at reported profit can therefore overestimate how much money is genuinely available.
Ask:
How much cash leaves this business every month to repay debt?
That number matters.
Owner withdrawals matter too
There is another sensitive area.
Money taken out by the owner.
Suppose a business produces GHS 400,000 in profit.
During the year, the owner takes GHS 250,000 out for personal use.
Again, the company may remain profitable.
But the cash is no longer in the company.
This becomes a problem when the business treats the company account like the owner’s personal wallet.
The owner draws money when needed.
The business pays personal expenses.
Then a large supplier bill arrives and everybody wonders why the company is short of cash.
A profitable business still needs to retain enough cash to operate.
The business cannot repeatedly distribute tomorrow’s working money today.
Your margin may be thinner than you think
Sometimes the problem is not where the cash went.
The problem is that the business was never keeping enough from each sale.
Suppose you sell a product for GHS 1,000.
You buy it for GHS 700.
You may immediately think:
“I made GHS 300.”
Not yet.
You still have:
transport,
sales commission,
bank charges,
packaging,
staff costs,
rent,
electricity,
marketing,
damaged stock,
customer returns,
and other overheads.
After everything is included, perhaps you keep only GHS 80.
Now give the customer a GHS 50 discount.
Your GHS 80 may become GHS 30.
The business is still making sales.
The sales team may even be celebrating record revenue.
But there is very little money left behind.
This is why growing revenue without watching margin can create the illusion of success.
A bigger sale is not automatically a better sale.
Put the numbers together
Consider this simple example.
A company records:
Sales: GHS 500,000
Profit: GHS 100,000
The owner naturally expects the business to feel financially comfortable.
But during the same period:
GHS 90,000 of customer invoices remain unpaid.
GHS 50,000 more cash has gone into stock.
GHS 25,000 was used to repay loan principal.
GHS 35,000 went toward new equipment.
GHS 20,000 was taken out by the owner.
You can now see why asking:
“Where is my GHS 100,000 profit?”
does not have a one-line answer.
The cash has moved.
Some is with customers.
Some is in stock.
Some paid debt.
Some bought assets.
Some left the business.
The problem becomes much easier to understand once you stop looking only at sales.
The four numbers I would ask for first
If you told me:
“My sales are good, but we never seem to have cash,”
I would not begin by telling you to increase sales.
I would first want to see four numbers.
1. Cash currently available
How much usable money is actually in the business today?
Not invoices.
Not expected payments.
Cash.
2. Money customers owe you
How much is outstanding?
More importantly, how much is overdue?
3. Stock currently held
How much money is tied up in inventory?
How much of that stock is slow-moving?
4. Payments due soon
What must the business pay in the next 30 days?
Salaries.
Suppliers.
Loans.
Taxes.
Rent.
Utilities.
Stock purchases.
Other commitments.
Those four numbers will often show where the pressure is coming from.
But I would add three more
Once the first four are clear, I would look at:
Gross margin
How much of each sale remains after paying the direct cost of what you sold?
Monthly operating expenses
How much does it cost to keep the business running before the owner earns anything?
Cash conversion time
How long does it take from spending money to serve a customer until that money returns to your bank account?
That last question is particularly important.
If you buy stock today, sell it after 30 days and allow the customer another 45 days to pay, your cash may be tied up for 75 days or longer.
Your business must survive that entire period.
Here is a simple test for your business
Take your latest monthly management accounts and answer these questions:
How much did we sell?
How much cash did we actually collect?
How much do customers currently owe us?
How much of that is overdue?
How much stock did we buy?
How much stock is not moving?
How much did we spend on equipment or other assets?
How much debt did we repay?
How much money did the owners take out?
How much cash will we need over the next 30 days?
If management cannot answer those questions reasonably quickly, the first problem may not be cash.
It may be financial visibility.
You cannot control what you cannot see clearly.
Do not manage cash from the bank balance alone
Many owners manage cash like this:
Open banking app.
Check balance.
Decide what can be paid.
That tells you what happened in the past.
It does not tell you what is about to happen.
A company can have GHS 200,000 in the bank today and still have a cash problem if GHS 260,000 of unavoidable payments are due next week.
This is why a cash flow forecast matters.
It answers a much more useful question:
What money do we expect to receive, what money must we pay, and when will each one happen?
That timing matters as much as the amounts.
What should you do if cash is always tight?
Do not automatically borrow more money.
Do not automatically chase more sales.
Do not automatically cut expenses everywhere.
First find the cause.
If customers are taking too long to pay, improve credit and collection.
If too much money is sitting in stock, fix purchasing and inventory control.
If margins are too low, review pricing and direct costs.
If expenses have grown faster than the business, examine overheads.
If growth is consuming cash, work out how much working capital the growth requires before expanding further.
If owner withdrawals are too high, separate business needs from personal spending.
If debt repayments are heavy, include them properly in cash planning.
Different cash problems require different solutions.
Treating every shortage with another loan can simply hide the real problem.
The question to ask on Monday morning
Do not ask only:
“How much did we sell last month?”
Ask:
“How much of those sales became cash, and where did the rest of the money go?”
That question changes the conversation.
Your sales report tells you whether customers are buying.
Your profit tells you whether the business model is producing a return.
Your cash position tells you whether the company can keep operating comfortably while everything else happens.
A healthy business needs all three.
If sales keep increasing but cash keeps getting tighter, do not celebrate the sales figure yet.
Find the money.
Because the real problem may not be that your business needs more customers.
It may be that too much of the money you have already earned is trapped somewhere else.