Your Business Is Making Sales. Why Is There No Cash?
Sales are coming in, but paying suppliers still feels difficult. Discover how unpaid invoices, stock purchases and everyday spending affect your cash.
Your shop has been busy. Customers are buying, invoices are going out, and the sales figures look encouraging. Then a supplier asks for payment, and you realise the money available is less than you expected.
Where did it go?
The answer often lies in the difference between sales, profit and cash—and the timing of when money enters and leaves your business.
Sales, profit and cash tell different stories
Sales show what you have sold, including sales customers have not yet paid for.
Profit is what remains after deducting the costs and expenses associated with earning that revenue.
Cash is the money available in your till, bank and business M-Pesa accounts.
A credit sale can increase sales and profit while leaving your cash balance unchanged. Buying stock can reduce cash immediately, even though the unsold goods remain an asset.
That is why a profitable business can still struggle to pay its bills.
A busy month with little cash left
Consider this simplified example, ignoring tax and assuming no opening customer or supplier balances:
| Activity during the month | Amount |
|---|---|
| Total sales | KSh 300,000 |
| Customer payments received | KSh 220,000 |
| Cash paid for stock | KSh 150,000 |
| Operating expenses paid | KSh 50,000 |
| Owner’s drawings | KSh 15,000 |
| Net increase in cash | KSh 5,000 |
The business made KSh 300,000 in sales, but KSh 80,000 is still with customers. After the listed payments, only KSh 5,000 has been added to its cash balance.
This table does not calculate profit. Profit depends on the cost of the goods actually sold and the expenses incurred. Owner’s drawings reduce cash but are not a business operating expense.
1. Customers are holding part of your money
Credit sales help customers buy, but they delay when your business receives money. Meanwhile, suppliers, rent and salaries may need payment sooner.
Review unpaid invoices every week. Check the customer, outstanding amount, due date and any promised payment date.
Agree payment terms before supplying goods. Follow up when invoices become due, and review overdue balances before extending more credit.
2. Too much money is sitting on the shelves
Stock is valuable, but it cannot pay a supplier until it is sold and the customer pays.
Buying large quantities because a supplier offers a discount can leave you short of cash for faster-selling products or essential bills.
Before reordering, check:
- What is already available?
- How quickly is it selling?
- What is already on order?
- When will the next supplier payment fall due?
Base purchases on demand and replenishment time, as well as price.
3. Everyday spending is not fully recorded
Delivery costs, transaction charges, packaging, small repairs and purchases made from the till all affect your cash.
When these payments are missing from the records, the business appears to have more money than it actually does.
Record each payment with its date, purpose and payment account. Keep supporting receipts and reconcile your bank and M-Pesa statements regularly.
4. Personal withdrawals are mixed with business expenses
Taking money from the business without recording it makes cash movements difficult to explain.
Record owner’s drawings separately from business expenses. Where practical, plan withdrawals around the business’s upcoming commitments instead of taking money whenever the balance looks comfortable.
5. Payments fall due before collections arrive
Even accurate records cannot remove a timing gap. A supplier may require payment this week while your customer is due to pay next month.
Prepare a simple four-week cash forecast. For each week, list:
- Opening cash available.
- Customer payments realistically expected.
- Supplier bills and operating payments due.
- Expected closing cash.
Use likely collection dates, including known delays. Update the forecast weekly so you can see shortages early.
Make cash visibility a weekly habit
Set aside time each week to review available cash, overdue invoices, supplier commitments and slow-moving stock.
SooBooks brings sales, customer balances, stock and banking records into one system, helping you understand where your business’s money is tied up.
Explore SooBooks and start keeping your sales, stock and payments in one set of books at soobooks.co.ke.