Profit-to-Cash Bridge — Profit on Paper, Broke in the Bank

1. Copy eight numbers from last monthNet income from the P&L, then the cash movements the P&L never sees. Estimates are fine.

2. Read the bridgeEach line shows where a dollar of profit went that did not reach the bank, or where cash came from that was not profit.

3. Check it against the bank statementIf the last line is close to your real change in cash, you understand your month. If it is far off, something is missing.

Example from the book:

Last month, in dollars

Net income on the P&L

Negative for a loss. Accrual basis: revenue counted when earned, not when paid.

Depreciation and other non-cash expenses

On the P&L, but no cash left the account this month. Added back.

Accounts receivable, start of month

Accounts receivable, end of month

Invoiced but not yet collected. Growing receivables pull cash out of the bridge.

Accounts payable, start of month

Accounts payable, end of month

Billed to you but not yet paid. Growing payables hold cash in the account for now (Chapter 6).

Equipment or asset purchases paid this month Loan principal paid

Only interest is on the P&L. Principal is real cash that profit never sees.

Credit-card balance paid down Owner draws

Not an expense; never on the P&L; absolutely on the bank balance (Chapter 8).

Tax payments or set-asides New loans or owner money put in

Cash in that is not profit.

Actual change in your bank balance (optional)

Lets the page tell you how far the bridge is from reality.

Break-even (Chapter 7)

How many jobs a month before you cover the costs that arrive whether you work or not.

Fixed costs per month

Rent, insurance, loan interest, software, depreciation: due even in a slow month.

Average price per job or sale Variable cost per job or sale

Supplies, fuel, materials, hourly help: only spent when the job happens.

Jobs or sales last month

Your bridge

The rules behind these numbers

Profit is not cash. The P&L measures profitability; the bank balance and the cash flow statement measure liquidity. A business can pass one test and fail the other in the same month. Chapters 1 and 5.
Depreciation is an accounting allocation of a purchase that already happened; it is added back. Chapter 4.
Receivables are a paycheck you have earned but not been handed; growth pulls cash out. Payables are the mirror image; growth puts cash back in for now. Chapters 3 and 6.
Loan principal, credit-card paydowns, owner draws and tax set-asides never appear on the P&L and always appear in the bank. Chapters 1, 5 and 8.
Break-even = fixed costs ÷ (price − variable cost per job). Every job past it is contribution; every job short of it is a loss you could see coming. Chapter 7.

This calculator applies the book's bridge to numbers you type in. It is not accounting, tax or lending advice. Your bookkeeper's cash flow statement is the authoritative version; this page is for understanding it.