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Stage 4 · Prove the business works financially · Lesson 2 of 2

Profit on paper, empty till

A business can make money every month and still be unable to pay its staff. This lesson shows why with numbers, then has you work out your own.

KWritten by the KAPEX team from distribution and export files in Mauritius and Madagascar. The case followed is a composite of several files, with rounded figures. Bank rates and terms are dated in the text. Updated 13 October 2026.

Two numbers, the same month

End of April: 912,000 rupees of profit since January, and the bank refuses the payroll

Mamy distributes electrical equipment in Port Louis. In January he signs two hotel chains and an installer. His sales go from 1.2 to 2.4 million rupees a month, at the same margin. He pays his supplier in Dubai when he orders. His new customers pay at 90 days, two of them closer to 105.

On 1 January he has 3.4 million in the bank. Here is that account, month by month.

03,400,000−488,000123456day 0day 91day 181

Lowest point : −488,000 Rs (day 120)

  1. 1day 31 · end of January: 1.2 M in, 2.17 M out−972,000 Rs
  2. 2day 59 · end of February: the same−972,000 Rs
  3. 3day 90 · end of March: the same−972,000 Rs
  4. 4day 120 · end of April: the payroll bounces−972,000 Rs
  5. 5day 151 · end of May: the new customers start paying+228,000 Rs
  6. 6day 181 · end of June+228,000 Rs

Composite of several files, rounded figures. Each month from January to April, the business earns 228,000 Rs in its profit and loss and loses 972,000 at the bank.

Mamy did not mismanage. Without realising it, he paid for his new customers’ stock and payment terms himself, and his account ran dry before their money arrived. The rest of this lesson explains how that works and gives you what you need to see it coming in your own business.

The accountant and the bank

The accountant counts a sale on the day of the invoice. The bank counts it on the day the money arrives.

In between are the weeks the stock spends in the warehouse and the time the customer takes to pay. Here is Mamy’s February, seen from both sides.

1
February, in the profit and lossSales 2,400,000 Rs. Purchases 1,872,000 Rs. Fixed costs 300,000 Rs. Result for the month: + 228,000 Rs.
2
February, on the bank statementOut: 1,872,000 Rs to the supplier, paid on order, and 300,000 Rs of costs. In: 1,200,000 Rs, the autumn sales, made at the old level. Balance for the month: − 972,000 Rs.
3
The differenceIt sits in the warehouse and in the invoices customers have not paid yet. It is your money, and you cannot spend it.

Same case, same month. Both readings are correct; they measure different things.

Financiers call this money tied up in stock and unpaid invoices the working capital need. When sales double, it doubles too, and it has to be paid for before the sales bring anything in.

Bankers put it simply: you repay a loan with money in the bank, not with profit. That is why a committee opens the cash-flow statement before the profit and loss, as the previous lesson showed.

  1. Before the month ends
  2. What your cycle locks up
  3. Three levers before borrowing
  4. The order that comes at the wrong time
  5. Seasons
  6. Four bank tools
  7. In your file
  8. What you produce

The rest of the lesson

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8 more parts, with the calculations on your own numbers and what to write in your file. The account is free, no commitment.

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The words of this lesson

Each word links to its full definition in the glossary.

Working capital
The money stuck in your stock and in invoices your customers have not yet paid.
Runway
The number of months your company can keep going on the money in the bank, if nothing new comes in.
Discounting
The bank advances you the money on an invoice or bill before your customer pays, for a fee.
Factoring
You sell your unpaid invoices to a third party, who advances the cash now.
Working capital line
A reserve you draw on when you need it and repay when you get paid.
Monthly spending
Everything that leaves the account in a month, without deducting what comes in.
Cash-flow statement
Tracking the money coming into and going out of the account, month by month, to know whether enough will remain.
Financial model
A sheet projecting your revenue, costs and cash over three to five years.
Policy rate
The rate at which the central bank lends to banks. It is a floor: banks always lend to you at more than this.

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