A job can earn a profit and still leave too little cash to pay a bill before the customer pays. Profit describes revenue and expenses under an accounting convention; cash flow follows receipts and payments. This simplified example illustrates the timing difference, not formal revenue-recognition rules.
Follow a completed job
Assume a job is completed and invoiced for 2,000 in week 1. Its included expenses are 1,400, paid that week. Under the example’s accrual convention, the job shows 600 of profit before any excluded expenses and tax. The customer pays in week 4.
| Item | Week 1 | Week 4 |
|---|---|---|
| Revenue recognised in this example | 2,000 | 0 |
| Included expense recognised | 1,400 | 0 |
| Job profit | 600 | 0 |
| Customer cash received | 0 | 2,000 |
| Job costs paid | 1,400 | 0 |
| Net job cash movement | −1,400 | +2,000 |
With opening cash of 1,000 and no other movements, cash would be short by 400 in week 1. The eventual 600 job surplus does not pay the earlier shortfall.
Add an illustrative deposit
A 500 advance receipt before those payments changes week-1 closing cash to 100. The later customer receipt becomes 1,500, not another 2,000. Total customer receipts remain 2,000.
The deposit does not increase the agreed selling price or total profit. It changes timing. This is a numerical example, not advice about allowable deposits or how they must be recognised in accounts.
Why borrowing is different from selling
Receiving a 1,000 loan would also improve short-term cash, but it would not turn the job’s revenue into 3,000. Repayment and interest need their own scheduled entries. Similarly, an owner contribution can add cash without being a sale.
This is why a bank balance cannot be used as a direct measure of job profitability. It combines operating activity with other cash movements and previous periods.
Which tool answers which question?
Use a margin calculator to compare revenue and a defined cost base. Use a cash forecast to see whether money is available when obligations fall due. Use a deposit-gap calculator for the narrower upfront-cost question.
The Australian Government’s cash-flow statement guide provides the receipts-and-payments framework. Our example adds a specific timing comparison to demonstrate why that framework answers a different question from a profit calculation. Cash-flow reference.
About the examples and sources
The figures are hypothetical teaching examples created for AskToBot, not surveyed prices or recommended industry margins. The linked references explain the underlying concepts; they do not supply or endorse these example figures. The arithmetic is checked against the stated assumptions. This is AI-assisted educational content and has not been independently reviewed by an accountant. Read how we check calculations.
Sources & references
- Set up a cash flow statement — Australian Government — business.gov.au
