Simple accounts and cash flow.
"Profit" and "money in the bank" are not the same thing. Many profitable businesses close because they run out of cash. Today you'll learn simple bookkeeping, the profit and loss statement, and how to manage cash flow.
Record every transaction
Keep it simple, but daily:
| Date | Description | Money in | Money out | Category |
|---|---|---|---|---|
| 3 Nov | 6 cakes sold (UPI) | ₹4,200 | Sales | |
| 3 Nov | Flour, cream, chocolate | ₹1,650 | Materials | |
| 4 Nov | Delivery charges | ₹300 | Delivery | |
| 5 Nov | Instagram ads | ₹500 | Marketing |
Apps like Vyapar, Khatabook, myBillBook or Zoho Books make this easy, or use a Google Sheet. Keep all bills and receipts (photos are fine).
The Profit & Loss (P&L) statement
November P&L — Sana's Bakery
Sales ₹62,000
− Cost of goods (materials, packaging) ₹26,000
= Gross profit ₹36,000
− Delivery ₹4,500
− Marketing ₹3,000
− Gas, electricity, phone ₹2,500
− Helper's salary ₹8,000
= Net profit ₹18,000Gross profit shows if your pricing works. Net profit shows if the whole business works.
Cash flow: the silent killer
Cash flow is the timing of money coming in and going out. Problems happen when:
- Customers or shops pay late (credit), but suppliers want payment now.
- You buy too much stock before a festival.
- Big one-time expenses arrive (oven repair, rent deposit).
A business shows ₹20,000 profit on paper but can't pay its supplier this week. What's the likely cause?
Profit on paper isn't cash in hand. Manage timing.
Decide a fixed monthly amount to take as your own salary, and leave the rest in the business for growth and the buffer. Taking money randomly hides whether the business really works.
What does gross profit tell you?
It's sales minus the direct cost of goods.
Your task (30 min)
Set up a simple bookkeeping sheet or app for your business (or a family business). Record the last 2 weeks of transactions and prepare a mini P&L. Then write a 4-week cash flow forecast.
Lesson 14 complete!
You can record transactions, read a simple P&L, and plan cash flow to avoid running out of money. Next: GST basics for small business.
Next: GST basics for small business →