How to read your company's cash position

2 min read

Balance ≠ availableCommitted money hides

Set aside taxVAT and CT aren't yours

Forecast the runwayWeeks of cash ahead

Step 1 — start with the real balance, not the headline

Your bank balance is a gross figure. From it, subtract money that's already spoken for: cheques and payments in flight, wages due, supplier invoices about to clear. What's left is closer to your genuinely free cash. The gap between the headline balance and the free figure is where cash-flow surprises live.

Step 2 — take out the tax that isn't yours

A big chunk of your balance is usually money held for HMRC. VAT you've charged is collected, not earned, and corporation tax is owed on profit. Mentally (better, physically) set these aside — see VAT and corporation tax cash planning. Only what remains is genuinely the company's to use.

Step 3 — remember profit isn't cash

A profitable month can still be a cash-tight one, because profit counts income when earned, not when paid. Money stuck in unpaid invoices is profit you can't spend. Understanding this stops you spending against profit that hasn't turned into cash yet. See profit vs cash flow.

Step 4 — look ahead, not just at today

Today's position matters less than next month's. Build a short cash flow forecast to see the weeks ahead — when big payments land, when receipts arrive, where a gap opens. This turns cash from a nasty surprise into a managed number. See how to forecast cash flow.

Step 5 — act on what you see

If the forecast shows a gap, you have time to act — chase debtors, delay non-critical spend, or arrange a facility before the pinch, from a position of strength. Credicorp lends to the company with no personal guarantee, so standby working capital doesn't put your home at risk. Size it with the working capital calculator.

Frequently asked questions

Why isn't my bank balance my real cash position?

Because much of it is already spoken for — payments in flight, wages due, and tax you're holding for HMRC that isn't really yours. Your true available cash is the balance minus committed payments and set-aside VAT and corporation tax. The gap is where cash surprises come from.

How can a profitable company run out of cash?

Because profit counts income when it's earned, not when it's paid. Money tied up in unpaid invoices is profit you can't spend yet. A company can be profitable on paper while short of cash, which is why reading your real cash position and forecasting ahead matters more than the profit figure.