Reflection of the Week
Where Did the Money Go?
Happy Friday, all!
If you’re like a lot of business owners this time of year, you’ve likely looked at your P&Ls, balance sheets, and tax returns and thought, “Where’s all the money I made?”
You’re not alone. This question always comes up for business owners, especially those operating on a cash basis, which means you recognize income when you receive payment and expenses when you pay them. While this method simplifies accounting, it doesn’t always make it easy to see where your money went.
Let’s break it down so you can get a clear picture of your cash flow, take control of your finances, and build a sustainable, mission-aligned business.
First: You’re Not Doing Anything Wrong
Before diving into the numbers, let me reassure you: asking, “Where did the money go?” is a smart and necessary question.
In a cash-basis business, income can be lumpy, expenses can sneak up on you, and it’s easy to mistake a full calendar for a full bank account. Understanding your cash flow helps you make better decisions—not just to survive but to grow intentionally and in alignment with your values.
Why Profit and Cash Aren’t Always the Same
Even in a cash-based business, where your income and expenses are recorded when money changes hands, your bank account doesn’t always reflect your “profit.”
Here’s why:
- Some payments you receive are already spoken for (like upcoming tax payments or subcontractor invoices).
- You may have made large one-time purchases that wiped out a good chunk of your cash.
- Or you may be regularly pulling money from the business to pay yourself—but not factoring that into your mental picture of what’s left.
This disconnect is common. The good news? We can fix it with a simple tool I call the “Where Did the Money Go?” Statement.
Build Your Own “Where Did the Money Go?” Statement
While I love P&Ls, Balance sheets, and Statements of Cash Flow, I find that many business owners tend to glaze over when looking at these sheets. So here’s a simplified version of the statement you can use each month, quarter, or year to track where your money went.
1. Start With Total Income (From Your Bank or Accounting Software)
This is the actual money you received from clients.
2. Subtract Business Expenses You Paid
These include tools, subscriptions, contractors, advertising, supplies, and anything else you paid for that month.
3. Account for Owner’s Pay
Whether transferring money to your personal account regularly or sporadically, this is a critical use of cash that doesn’t always get tracked in traditional profit calculations. (We call these owner’s draws on your balance sheet.)
4. Include Taxes You’ve Paid or Set Aside
If you’ve made quarterly tax payments or transferred money into a tax savings account, include that here. It’s money that left your business.
5. Subtract Large One-Time Investments
Did you fully pay for a conference, online course, or coaching program? Did you upgrade your tech? Those payments may not recur monthly but significantly impact your available cash.
6. Look at Your Net Cash Movement
What’s left after all that? Is it more than you started with, or less? That’s your actual “profit”—and it tells you whether your business is generating excess cash or eating into reserves.
Sample Statement for a Cash-Based Business
Total income: $12,000
– Operating Expenses: -$4,500
– Owner’s Pay: -$3,000
– Taxes Set Aside: -$1,500
– One-Time Course Payment: -$2,000
—————————————————
Net Cash Left Over: $1,000
So even though you made $12,000 this month, you may only see $1,000 left in the bank—because the rest has already been used to keep your business running, pay yourself, and invest in your future.
You’ll probably note that this statement reflects the Profit First model, and you’d be right! This statement and the Profit Model aim to help you see, in real time, where your money is.
Why This Matters
Understanding where your money goes each month gives you power—not just over your numbers, but over your time, energy, and mission. It allows you to:
- Set more realistic income goals
- Plan for taxes and investments with less stress
- Adjust your pricing or expenses to meet your financial needs
- Confidently pay yourself without fearing cash shortfalls
If you’ve been wondering where all your money has gone, that’s a good thing. It means you’re engaged, you care about your business, and you’re ready to make empowered financial decisions.
Don’t let the numbers intimidate you. Every business owner starts here—curious, confused, and committed to figuring it out. And once you do? You’ll gain clarity and be in a much better position to grow your business in a sustainable, meaningful way.
Questions of the week
- When was the last time you reviewed how much cash stayed in your business after paying expenses, taxes, and yourself?
- Are there spending patterns or one-time investments you’ve made recently that explain why your bank balance doesn’t reflect your income?
- What would change in how you run your business if you tracked your cash flow every month?
Tool of the Week
I recommend reviewing your “Where Did the Money Go?” Statement each month. It only takes 15-30 minutes and can radically shift how you relate to your money.
You can build your own spreadsheet, use accounting tools like Wave or QuickBooks, or simply pull data from your business bank account and jot down the numbers. The key is consistency.