The 60-Second Cash Trap Check
5 places professional service firms bury cash they've already earned, before it ever shows up as a loss.
ps - if you'd rather skip the math and have us run this on your actual numbers, book a free 30-minute consultation here: https://calendly.com/pdbs/consultation-call
Not a client yet? We run monthly bookkeeping and fractional CFO advisory for consulting firms, agencies, and boutique practices that have outgrown DIY books.
We use these same five checks in every close we run for our advisory clients.
Most owners find out their margin was wrong at tax time. Not before a hiring decision, not before turning down a project because cash felt tight, at tax time, when it's too late to act on it.
The owners who don't get surprised run these five checks monthly. Each one takes about a minute once you know where to look.
The 5 Cash Traps
Retainers and deposits booked as revenue on arrival
Unbilled hours sitting as invisible cash
AR aging nobody is watching
Contractor classification exposure
Owner draws blurring your real margin
Run all five. Even one unchecked box is usually worth more than your next price increase.
1. Retainers and Deposits Booked as Revenue on Arrival
When a retainer or deposit lands in the bank, it's tempting to count it as revenue that month. Most books do exactly that. But if the client hasn't received the work yet, that cash isn't earned. It's owed.
Bad: A $6,000 retainer lands March 1st. March's P&L shows $6,000 in revenue, even though the work runs through May.
Good: The $6,000 is booked as unearned, then recognized in pieces as the work is actually delivered.
Add up every retainer or deposit sitting in your bank account right now
for work you have not finished delivering.
That total is cash your P&L may be counting as profit you have not
actually earned yet.2. Unbilled Hours Sitting as Invisible Cash
Work gets done. The invoice goes out days or weeks later. In between, that value exists on no report you look at.
Hours worked but not yet invoiced in the last 30 days, times your
billing rate, equals cash you've earned that isn't on any report yet.3. AR Aging Nobody Is Watching
An invoice sent is not the same as an invoice paid. Past 60 days, the odds of ever collecting drop fast, and most owners don't look at the aging report until a client already feels gone.
Add up every invoice open more than 60 days.
That total is cash you're treating as "in the business" that might
not come back.4. Contractor Classification Exposure
Score every 1099 worker on your team against these three:
You set their hours
You provide their tools or software
They work exclusively for you
Two or more checked and the IRS likely sees an employee, whatever the contract says. That's back payroll tax, not a rounding error.
5. Owner Draws Blurring Your Real Margin
Owner draws and personal expenses run through the business both eat into what the P&L calls profit, even though neither shows up as its own line on most reports.
Net profit on your P&L, minus owner draws taken this month, minus
personal expenses run through the business, equals your real
operating margin.The First 48 Hours
Run all five calculations above using last month's numbers. Most owners find at least one trap worth more than their next planned price increase.
Week 1
Fix the fastest ones first. Usually that's following up on AR past 60 days and invoicing whatever work is sitting unbilled.
Weeks 2 to 4
Turn the check into a habit. Run it yourself on the first of every month, or hand it to someone whose job is to catch it before you do.
What This Isn't
This isn't a pitch to change your pricing or your client relationships. It's a check on how your numbers are tracked, nothing else. You see every number before anything changes, and there's no long-term contract required to start a conversation.
If You'd Rather Skip the Math
Book a free 30-minute consultation and we'll run this on your actual books together: https://calendly.com/pdbs/consultation-call
No pitch, just a look at the numbers.
John
Peterson Bookkeeping & Advisory
