Your Profit & Loss report shows whether your business is profitable. Your bank balance shows how much cash you actually have available.
A business can show profit on paper and still struggle with cash flow.
A remodeling contractor completes a profitable kitchen renovation in April and sends the invoice immediately. On paper, the business looks successful because the income is already recorded. But if the customer payment does not arrive until June, the business still has to cover payroll, materials, fuel, insurance, and taxes during those weeks with limited cash available in the bank account. The project was profitable — the cash simply had not arrived yet.
Understanding the difference helps you plan expenses, taxes, and growth with confidence.