Our Growth Finally Showed Up in the Bank

Jason Medlin

3 days ago

6 min read

Black and white photo of a confident home service business owner standing in the doorway of a finished home

[Composite client story based on real experiences. Company and owner identities and details have been changed to protect privacy.]

"We had the best year we'd ever had, and I had the same amount of money in the bank. I couldn't explain it to my wife, and I couldn't explain it to myself."

That's how Marcus described the end of his record year. He owns a residential electrical company: service calls, panel upgrades, and remodel work for a handful of local builders. Eighteen employees, a growing fleet of vans, and a phone that rarely stops ringing.

Revenue had grown about 30 percent. His profit and loss statement showed roughly $360,000 in profit, the most the company had ever earned. And when he opened the bank account in December, the balance was within a few thousand dollars of where it had been in January.

He wasn't in trouble. Payroll cleared. Vendors got paid. But a year of hard work had produced a bigger number on one report and nothing he could point to anywhere else.

Before: Profit on Paper, Nothing in the Account

Marcus did what most owners do when the numbers don't match. He assumed something was wrong.

Maybe the books were off. Maybe someone was overbilling him. Maybe the profit figure was just an accounting number that didn't mean much. He'd started to quietly distrust his own financial statements, which made every decision harder. Should he hire another electrician? Buy another van? Take a bigger draw? He had no confidence in the answer, because he had no confidence in the numbers.

"I kept thinking growth would fix the cash," he said. "Every time we got busier, I figured this would be the month it caught up."

It never did. And that wasn't bad luck. Growth was the reason.

Why Growth Uses Cash Before It Makes Cash

A growing business has to spend money before it collects money. You pay your crew every two weeks, buy materials up front, and add vans and tools to handle the extra work. The customer pays later, sometimes much later. The faster you grow, the more cash gets tied up in that gap.

Profit also leaves the business in ways the profit and loss statement doesn't show. Paying down a loan reduces your cash but not your profit. Buying a van with cash reduces your bank balance by the full price, while the profit and loss statement only shows a portion of that cost each year. Owner draws don't appear on it at all.

So a business can earn real profit and still end the year with nothing extra in the bank. The profit is real. It's just sitting somewhere other than the checking account.

What We Found: Four Places the Money Went

When we sat down with Marcus, we didn't start with his bank statements or a long list of expenses. We started with one simple page: his profit for the year at the top, and then every place that profit went before it could reach the bank.

It took about an hour to build. It answered a question he'd been carrying for months.

1. Customers who hadn't paid yet. As the remodel work grew, so did the money builders owed him. Several paid on long terms, and a few paid well past them. Receivables had climbed by about $90,000 over the year. That work counted as profit, but the cash was still in someone else's account.

2. Equipment bought outright. Marcus added three vans, a trailer, and a round of new tools during the year. He paid cash for nearly all of it, about $115,000, because he didn't like carrying debt. The vans would serve the business for years, but the cash left in a matter of weeks.

3. A loan paid off early. When the account looked healthy in the summer, he made extra payments on an equipment loan and paid it off ahead of schedule. That was about $45,000 of principal. It felt responsible, and it was, but it came out of the same cash he'd need in the fall.

4. Draws that grew with revenue. As sales went up, his draws went up with them, to about $115,000 for the year. He wasn't overpaying himself. But he was setting his draws by how busy the business felt, not by how much cash it was actually keeping.

Add those four together and they came to slightly more than his profit. The money hadn't disappeared. Every dollar was accounted for. None of it had been planned.

"When you put it on one page, it's almost embarrassing," Marcus said. "Every one of those was a decision I made. I just never saw them all together."

The Plan: One Decision for Each

None of the four was a mistake on its own. Collecting from builders, buying vans, paying off debt, and paying yourself are all normal parts of running a business. The problem was that each one happened by default. So we gave each one a rule.

Receivables got a process. Remodel jobs moved to a deposit at signing and progress billing on larger projects. Service calls were paid at completion. And Marcus started a short weekly look at who owed what, so slow payers got a call in week two instead of week eight.

Equipment got a budget. We built a simple capital plan for the year: what the business would need, roughly when, and how to pay for it. For long lived assets like vans, financing on reasonable terms often made more sense than draining the account, because the payment matched the years the van would work. Purchases were planned in advance instead of made whenever the balance looked high.

Debt paydown got a floor. Extra payments still happen, but only after cash is above a minimum balance we set together, based on two months of operating costs. Paying off debt early is a good goal. It just shouldn't leave the business short in a slow month.

Draws got a structure. Marcus moved to a set monthly draw, with a quarterly distribution from cash that was actually above the reserve. That way, his pay grows when the business is keeping more cash, not just when it's busier.

Finally, the one page we built became a monthly report. Every month, he sees his profit and exactly where it went. If the bank doesn't grow, he knows why within minutes, not months.

After: Growth That Lands in the Account

The next year, revenue grew again, more slowly and more deliberately. Profit was in the same range. The difference was where it ended up.

By the following fall, the bank balance had grown by about $140,000. The reserve was fully funded. Two more vans were added, both financed and both planned months ahead. Receivables were down even though sales were up, because builders were paying on the new terms. And Marcus took his first quarterly distribution without checking the account three times first.

The bigger change was trust. He stopped doubting his financial statements, because he could finally see how they connected to the bank. When he decided to hire two more electricians, he made the call with a clear view of what it would cost and when the cash would come back.

"I thought growth was supposed to fix the cash," he said. "It turns out growth was using the cash. Once I could see where it went, I could decide where it should go."

Is Your Growth Showing Up in the Bank?

If any of these sound familiar, the same one page exercise is worth doing:

Revenue and profit are up, but your bank balance isn't
Customers are taking longer to pay than they did a year ago
You've been buying equipment with cash whenever the account looks healthy
You've paid down debt faster than planned and felt tight afterward
Your draws rise and fall with how busy the business feels
You've started to wonder whether your financial statements are right

Growth is good. But growth that never reaches the bank leaves you working harder for the same result. The answer usually isn't more sales. It's seeing where the profit goes and deciding on purpose.

Let's Find Where Your Profit Went

At Bottomline Capital, we help business owners connect their profit to their bank balance. We trace where the money went, build a plan for each piece, and give you a monthly view so growth turns into cash you can use.

If you had a strong year and the bank doesn't show it, let's walk through it together.

Book a conversation: https://www.bottomlinecapitalllc.com/book-online