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Cash Timing and Profit Reference

Follow a hypothetical earned invoice and related costs across two months to see why operating profit and cash movement belong in separate columns.

By PriceAndProfit Editorial Updated

The work is completed in January, and all $7,000 of related costs are recognized with it in this illustration. The customer pays in February. Some suppliers are paid in January and the rest in February. The two-month cash total matches the profit only because every receivable and payable in this small example is settled and no other transactions occur.

Operating profit = earned revenue − recognized cost; net cash = receipts − payments
Hypothetical worked values; no market or statutory rates
PeriodEarned revenueRecognized costOperating profitCash receiptsCash paymentsNet cash
January $12,000 $7,000 $5,000 $0 $4,000 −$4,000
February $0 $0 $0 $12,000 $3,000 $9,000
Total $12,000 $7,000 $5,000 $12,000 $7,000 $5,000

How to read and reuse this example

Prepare a separate dated schedule rather than treating the profit column as cash available to spend. January produces a $5,000 operating profit while consuming $4,000 of cash. An opening balance or another funding source must cover that payment timing. February then collects an old receivable; that receipt is not a second sale.

Boundaries and exceptions

Real statements can also differ because of inventory, prepaid expenses, capital purchases and other timing items. The table intentionally leaves those out so the invoice bridge can be checked line by line. It is not a rule for recognizing a particular contract. Use your accounting records for recognition and actual payment dates for the cash forecast.

Method reference: SEC: Beginners' Guide to Financial Statements. Checked October 22, 2026. Income, balance-sheet and cash-flow measures have different boundaries.

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