Episode #6: The bank balance

Episode #6: The bank balance is NOT your profit.

“I have AED 250,000 in the bank, so I’m doing great.”

Not necessarily. Look at what’s actually inside that balance:

🟣 AED 100,000 is a bank loan. You have to pay it back. 🟡 AED 60,000 is customer advances. You haven’t delivered the work yet. 🔵 AED 15,000 is VAT collected. It belongs to the tax authority. 🔵 AED 45,000 is your own capital that you put in. 🟢 AED 30,000 is the actual profit.

Cash and profit are different things, for three reasons:

1️⃣ Timing. An invoice you’ve sent is profit, but it isn’t cash until the customer pays. 2️⃣ Non-cash costs. Depreciation lowers your profit, but no money leaves the bank. 3️⃣ Not your money. Loans, advances, VAT and capital all add to your balance without adding to your profit.

Profit = Revenue earned − Expenses incurred. Earned ≠ received. Incurred ≠ paid.

Before you spend, ask: ✅ Did customers pay me, or did I only invoice them? ✅ Is any of this a loan, advance, VAT or my own capital? ✅ Which bills and taxes are still due? ✅ What is my real profit this month?

If you can’t answer these, your bank balance is giving you a false picture of how the business is doing.

Next up: Episode 7. Follow along so you don’t miss it.

Counting Crux |

#Accounting #UAEBusiness #Profit #CashFlow #Bookkeeping #Founders #DubaiBusiness #SmallBusiness