(TAX UPDATE) The P&L looks beautiful. So why is there still no money in the bank?

Introduction

"I am making profit. But I got no cash in bank."

Every audit season, many bosses will sit across from me and say this exact sentence.

Same face. Same confusion. Same pain.

Accrual Concept

I've been doing audit for 25 years. I've lost count how many times I've heard this line.

So let me share the most brutal accounting lesson nobody teaches you in school.

It's called the Accrual Concept.

The moment you sell, profit goes into your books.

Not when you collect the money. When you sell.

So your P&L looks very shiok.

Auditor see, no issue.

Banker see, nod head.

Wife see, happy.

But cash doesn't care about your P&L. Cash only knows one thing:

Got money inside bank account or not. No means no.

Goreng Pisang Story

Let me tell you a story about a goreng pisang uncle which i always use during the meeting

(Yes, I always use goreng pisang uncle. Bear with me. The lesson is real for SME.)

Uncle has been selling pisang goreng for 20 years. Cash business. Simple life. Every day, banana goes in. Cash comes out. Clear cut.

20 years down the road, uncle managed to save RM7,000 in the bank. Blood and sweat money. Saving up for his kid's Form 6 school fees.

Then one day, a manager from a big café chain walked up to his stall.

"Uncle, we want 200 pisang goreng daily. We're a big company, solid business, guaranteed volume."

Uncle did the math on the spot. 200 pcs × RM2 = RM400 per day. One month = RM12,000. One year = RM144,000.

In 20 years of goreng pisang, uncle has never seen numbers like this.

One small condition: Payment term 60 days.

"No problem lah. Big company won't run away one."

Month one, uncle went ALL IN. 4am every morning. 200 pisang goreng. Like clockwork. Banana, flour, oil, gas, all pay first from his own pocket.

Month-end, uncle opened his little notebook:

P&L (paper world):

Sales: RM12,000

Cost: RM7,000

Profit: RM5,000 🎉

Wife happy. Uncle happy. "This month not bad, let's go makan seafood! Buy new shoes for the kids!"

Spent RM500. Makan besar.

Then uncle opened his cash drawer.

Cash (real world):

Walk-in customer sales: +RM1,500

Paid banana, flour, oil, gas, rental: −RM7,000

Seafood celebration: −RM500

Chain store payment: RM0 (still 60 days more)

Net cash this month: −RM6,000 😰

P&L says: You made RM5,000. Cash says: You already lugi RM6,000.

Same month. Same business. Two completely different stories.

Uncle checked his bank account. RM7,000 savings, now only RM1,000 left. The kid's school fees? Almost all gone.

That night after closing, uncle sat in front of his stall. Staring at his notebook. RM5,000 profit. Clearly written. Black and white.

But the drawer was almost empty. Kid's school fees, gone. And the RM12,000 from the chain? Still 60 more days to wait.

That was the moment uncle finally understood:

Profit is paper profit. Cash is the King.

So every time a boss comes to me asking, "I am making profit, why no cash one?"

I don't jump straight into the accounts.

I ask three things first:

1. The debtors, how much is more than 90 or 120 days days old? Can still collect or not?

2.Your bank balance, minus the next 3 months of supplier, salary, SST, tax, how much left?

3.If customer delay payment by one month, can your business tahan or not?

If you can't answer these three confidently, doesn't matter how nice your P&L looks.

Because here's the scary part: Most SME bosses don't lose because of bad business. They lose because they don't know profit and cash are two different things.

Then slowly, they use their own savings to plug the hole. Plug until one day, savings habis. Only then they realise, all this while, I was financing my customers. Using my own money some more.

Uncle's pisang goreng business is small. But the lesson is the same for every SME.

"Making money" and "Getting paid", never the same thing one.

You thought you were making profit. Actually, you were using your savings to feed your customers.

PS : Authored by Mr Koh Teck Peng, the Group Principal at KTP. 25 years in audit, helping SMEs see their accounts clearly. Not just profit, but real cash health.

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