Receivables
Invoices raised and not yet paid, often 60–120 days for OEMs, dealers and government.
Answer these questions before you read on
Commit to an answer before you open each one. Together they show where the problem is.
1Your CA says the company made ₹95 lakh profit last year. Can you point to where that ₹95 lakh is today?
Most owners can't, and that's the whole problem. Profit is a calculation about a year. It doesn't come with an address.
2You invoiced ₹50 lakh on 25 March and the customer paid in May. Which year's profit has that sale? Which year's bank balance?
The profit belongs to the year you invoiced. The cash belongs to the next year. The same rupee is counted on two calendars.
3Your customer deducted ₹2 lakh TDS from your invoice. Is that cash you can spend?
No. It's a tax credit you can claim against your own tax, and only if it shows in Form 26AS. Until then it's neither profit you lost nor cash you have.
4You paid ₹40 lakh for a machine last year. How much of that is in the P&L?
Only the year's depreciation. The full ₹40 lakh left the bank.
5You moved ₹15 lakh to your personal account as a loan from the company. Did profit go down?
No. Withdrawals, loans to directors and dividends come out after profit is calculated. They empty the bank account and leave profit unchanged.
If any answer surprised you, you've found the problem. Your profit isn't wrong. You're asking one number to answer two questions: did we earn it? and do we have it?
Why profit and cash tell different stories
Your profit and loss statement matches each sale with the cost of making it, whatever the date the money moved. Your bank account counts only money that has moved. Both are right; they answer different questions. In Indian businesses, seven things usually explain the gap:
Waiting
Waiting
Stock and work in progress
Material and finished goods paid for and not yet sold.
Waiting
GST and TDS
Input credit not yet in GSTR-2B, and TDS deducted by customers, waiting to be adjusted.
Converted
Machinery and loans
Assets paid for in cash, and loan principal repaid. Neither is fully in the P&L.
Withdrawn
Promoter money
Withdrawals, loans to directors, dividends and family spending.
Too small
Profit that can't carry the load
When tax, loan repayments and promoter needs are larger than profit plus depreciation.
Find your profit's address
Put last year's balance sheet next to this year's. Enter the changes below. The calculator shows where the profit went, largest first:
Find your profit's addressExample figures · replace with yours
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Then check how much of today's bank balance is really yours to spend:
How much of the bank balance is yours?Example figures · replace with yours
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Check that the profit is real
- Receivables over 180 days. Will they really pay? If not, the profit was never earned.
- Slow and obsolete stock. Valued at cost on the books, worth less on the market.
- TDS not in Form 26AS. If the customer didn't deposit or report it, you can't claim it.
- GST credit not in GSTR-2B. If the supplier hasn't filed, you can't use it.
- Unbilled work and unreconciled accounts. Profit based on estimates or entries nobody has checked.
Then test whether the profit is big enough for what it has to pay for:
Is your profit big enough?Example figures · replace with yours
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Six businesses, six versions of the same problem
The same problem looks different in every industry. Pick the business closest to yours:
These are composite businesses with illustrative figures, built to show how the method works. They are not CFOSurge client results.
FMCG distributor, ₹45 crore turnover
The numbers (₹ lakh, illustrative)
| Profit for the year | +62 |
| Increase in retailer receivables | −38 |
| Scheme and claim money due from principals | −22 |
| Increase in stock | −10 |
| Depreciation | +4 |
| Promoter withdrawals | −18 |
| Income tax paid | −16 |
| More credit from principals | +24 |
| Change in the bank balance | −14 |
The diagnosis
The profit is real, but most of it is waiting with retailers and principals. Claims due from principals alone are a third of the profit.
The full solution, in order
- Submit every scheme claim monthly, with complete documents, and track each to receipt.
- Put slow retailers on shorter limits or cash-and-carry.
- Set promoter pay from cash that has arrived, not from the year's profit.
Don't do this
- Counting claims as cash before they're paid.
- Extending retailer credit to hit principal targets.
Numbers to watch every month
- Retailer days outstanding
- Claims receivable by principal
- Stock days
Auto-component maker, ₹38 crore turnover
The numbers (₹ lakh, illustrative)
| Profit for the year | +110 |
| Increase in OEM receivables | −65 |
| Increase in stock and WIP | −30 |
| CNC machine paid from the CC | −48 |
| Depreciation | +22 |
| Term loan principal | −18 |
| Promoter withdrawals | −24 |
| Income tax paid | −28 |
| More supplier credit | +31 |
| Change in the bank balance | −50 |
The diagnosis
Two things did it: OEMs now pay in 90+ days (waiting), and a ₹48 lakh machine came out of working capital (converted).
The full solution, in order
- Refinance the machine with a term loan over its life, putting ₹48 lakh back into the CC.
- Print MSME terms on every invoice and offer OEMs TReDS.
- Cost new OEM orders including the finance cost of their payment terms.
Don't do this
- Buying capital equipment from the CC account.
- Accepting 90-day terms without pricing them.
Numbers to watch every month
- OEM-wise days outstanding
- CC balance that never comes down
- Stock and WIP days
Garment exporter, ₹60 crore turnover
The numbers (₹ lakh, illustrative)
| Profit for the year | +140 |
| Increase in export receivables | −70 |
| Export incentives receivable | −25 |
| Increase in fabric and WIP | −35 |
| Depreciation | +15 |
| Promoter withdrawals | −20 |
| Income tax paid | −30 |
| More supplier credit | +20 |
| Change in the bank balance | −5 |
The diagnosis
The profit is mostly waiting: buyers paying later than agreed, and incentives on the government's timetable.
The full solution, in order
- Move slow buyers to LC or advance terms next season.
- Discount accepted export bills instead of waiting.
- Forecast incentives conservatively and claim them on time.
Don't do this
- Spending expected incentives before they arrive.
- Shipping to buyers already overdue.
Numbers to watch every month
- Export receivables by buyer
- Incentives receivable and their age
- Packing credit liquidation dates
Specialty chemicals maker, ₹80 crore turnover
The numbers (₹ lakh, illustrative)
| Profit for the year | +220 |
| Increase in receivables | −80 |
| Increase in imported raw material stock | −60 |
| GST credit not yet in GSTR-2B | −35 |
| Depreciation | +30 |
| Reactor paid in cash | −55 |
| Income tax paid | −55 |
| More supplier and LC credit | +40 |
| Change in the bank balance | +5 |
The diagnosis
A mix of waiting (receivables, stock, GST credit) and converted (a reactor paid in cash). Every address has a fix.
The full solution, in order
- Reconcile GSTR-2B monthly and hold payments to suppliers who haven't filed.
- Stage raw material imports against the production plan.
- Fund the reactor with a term loan.
Don't do this
- Buying a full year's raw material on a price view.
- Ignoring GST credit that never appears.
Numbers to watch every month
- GST credit pending in 2B
- Raw material days
- Receivables by customer
Civil contractor, ₹25 crore turnover
The numbers (₹ lakh, illustrative)
| Profit for the year | +80 |
| Bills raised, not yet certified | −45 |
| Retention held by clients | −30 |
| Material at site | −12 |
| Depreciation | +18 |
| Equipment EMIs (principal) | −20 |
| Promoter withdrawals | −15 |
| Income tax paid | −20 |
| More subcontractor credit | +25 |
| Change in the bank balance | −19 |
The diagnosis
Nearly all the profit is waiting in certification and retention, places banks don't lend against.
The full solution, in order
- Track every bill by stage and push the slowest step.
- Claim retention release on the due date, or replace it with a bank guarantee.
- Ask for mobilisation advances on new contracts.
Don't do this
- Starting variations without written approval.
- Bidding without pricing the payment delay.
Numbers to watch every month
- Bills by stage
- Retention by project and release date
- Guarantee limits in use
IT services firm, ₹12 crore revenue
The numbers (₹ lakh, illustrative)
| Profit for the year | +130 |
| Increase in client receivables | −40 |
| Unbilled work at year-end | −25 |
| TDS deducted by clients, not yet adjusted | −24 |
| Office fit-out paid in cash | −30 |
| Depreciation | +12 |
| Dividend to promoters | −20 |
| Income tax paid | −15 |
| Change in the bank balance | −12 |
The diagnosis
Profit is waiting in unbilled work and TDS, and a fit-out was converted from cash.
The full solution, in order
- Bill on day one for last month's work.
- Reconcile 26AS quarterly so TDS credits are claimed in full.
- Fund fit-outs with a term loan or lease.
Don't do this
- Waiting for project completion to invoice.
- Carrying TDS as a receivable from the client.
Numbers to watch every month
- Unbilled revenue
- Days sales outstanding
- TDS receivable vs 26AS
Hover over a business for a preview (tap on a phone), then click to open the full case.
What to do, address by address
| Address | The fix |
|---|---|
| Receivables | Invoice on dispatch, chase the oldest first, use MSME terms and TReDS where you can |
| Stock | Reorder by weeks of cover, clear slow items, stage big purchases |
| GST and TDS | Reconcile GSTR-2B monthly, hold payments to non-filing suppliers, reconcile 26AS quarterly |
| Machinery and loans | Fund long-life assets with term loans matched to their life, not from the CC or operating cash |
| Promoter money | Set a fixed monthly promoter pay from profit that has reached the bank |
| Too small | Price, mix and cost first; more volume at the same margin only makes it worse |
Short of cash in the next few weeks? List every payment due in 14 days; call your five largest overdue customers today; ask suppliers you trust for a short extension in writing; pay statutory dues first, because penalties cost more than any supplier interest.
A 30-minute monthly routine
- Write down the month's profit and the change in the bank balance.
- Compare the balance sheet with last month and note the biggest movements.
- Check receivables over 90 days, slow stock, and GST and TDS credits not yet usable.
- Name the biggest address and apply its fix.
- Update the 13-week cash forecast.
Five mistakes that make it worse
- Paying for machinery out of the CC account.
- Taking promoter money out based on last year's profit, not this year's cash.
- Treating TDS deducted by customers as a bad debt, or ignoring it.
- Paying suppliers before their GST filing shows in GSTR-2B.
- Chasing more sales at the same margin to fix a margin problem.
Official sources and guidance
Rules, rates and thresholds change. Check the current position at these official sources before acting.
- Income Tax DepartmentThe Income-tax Act, advance tax, TDS and Form 26AS
- GST portalReturns, GSTR-2B and input tax credit
ReferenceKey terms in plain English
5 terms
- Accrual accounting
- Recording income and costs when they're earned or incurred, not when cash moves.
- Receivables
- Money customers owe you for goods or services already supplied.
- GSTR-2B
- The monthly statement showing input tax credit available to you, based on suppliers' filings.
- Form 26AS
- The annual tax statement showing TDS deducted on your behalf and other tax credits.
- Cash conversion cycle
- Days of stock plus days of receivables, less days of supplier credit.
Questions owners also ask
Why does my business show profit but no cash?
Because profit counts what you earned, while cash counts what has actually arrived. The difference usually sits in receivables, stock, GST and TDS credits, machinery paid in cash, loan repayments or promoter withdrawals.
Is TDS deducted by customers a loss?
No. It's tax paid on your behalf, which you can adjust against your own income tax, once it appears in Form 26AS.
Should I take a bigger CC limit?
Only if the cause is genuine working-capital growth. If the cause is machinery paid in cash, promoter withdrawals or thin margins, a bigger limit only delays the problem.
Want a CFO to work through this with you?
If the gap still doesn't make sense after this, or it does and you want help closing it, A CFOSurge CFO can go through it with you using your actual numbers.
- Plans from ₹50,000 a month, fixed after a free assessment
- Free consultation with a senior CFO
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