Explain where cash went in a profitable month

Start with the approved profit figure and the change in reconciled cash for the same period. Confirm which accounts and entities are included. A company-wide profit figure cannot explain the movement in only one operating bank account without additional transfers and account balances.

The SEC's financial-statement guide explains that the income statement and cash flow statement answer different questions. The bridge should show the transactions creating that difference. It should not imply that profit is wrong merely because the bank balance moved in another direction.

Review changes in receivables, payables, inventory, customer prepayments, prepaid expenses, and other relevant operating balances. Check the underlying schedules rather than assuming every movement is cash-related. Reclassifications, acquisitions, and currency effects can require separate treatment.

In a simplified example, $20,000 of profit, a $30,000 increase in receivables from unpaid sales, and a $5,000 increase in unpaid operating bills produce negative $5,000 of operating cash movement, assuming no other differences. The example shows how profitable sales can arrive before their cash collections.

Identify expenses or income that did not involve current-period cash, then consider asset purchases, borrowing, principal repayments, and owner transactions. Keep the categories consistent with the company's reporting framework. A loan receipt can increase cash without improving operating profit.

Suppose the company in the example also spends $10,000 on equipment and receives $25,000 from financing. Its total cash increases by $10,000 under those simplified assumptions, despite negative operating cash movement. Label the financing contribution so the reader does not mistake it for stronger customer collections.

Reconcile the explained movement to opening and closing cash. Keep any unresolved difference visible while investigating it. Do not add an other row solely to force agreement without supporting detail.

Use the bridge to identify the next action: collecting overdue invoices, reviewing inventory purchases, planning a loan payment, or correcting an account mapping. Retain the supporting schedules with the report. A reader should be able to tell both why cash changed and which parts of that change are likely to recur.