HBR Work Agency turned a profit in 2025 and faced an insolvency petition the following autumn

A profitable year on paper, a petition in the register

HBR Work Agency s.r.o., a limited liability company based in Kralovice in western Bohemia, closed 2025 with revenue of CZK 17.2m and operating profit of CZK 2.2m. After tax and financial items it kept CZK 1.8m as net profit. These are the accounts of the company on its own, without any group, under Czech accounting standards, for the calendar year 2025. The s.r.o. is the most common Czech legal form for small firms, and its owners are not personally liable for its debts.

In October 2026 an insolvency petition concerning the company was entered in the Czech insolvency register. Within days, the company's 2025 financial statements were deposited in the collection of documents, the public register where Czech companies must file their accounts.

Those two entries sit uncomfortably next to each other. One shows a business that earned money. The other shows that someone, either the company itself or a creditor, has asked a court to look at whether it can pay its debts. A petition is not a verdict. The court first decides whether the company is in fact insolvent, and many petitions end without that finding. Even so, a profitable year followed by a petition is a pattern worth understanding, because it is not as rare as the income statement makes it look.

The margins are not those of a struggling firm

Taken at face value, 2025 was a good year. The operating margin, the share of revenue left after the costs of running the business, was 13.0%. Net margin, what remained after everything, was 10.7%. EBITDA, which is operating profit with depreciation and amortisation added back, reached CZK 2.8m, or 16.1% of revenue.

Depreciation itself was only CZK 542k. That says something about the shape of the business: it does not run on heavy machinery or large buildings. Most of its costs are the kind that are paid in cash month by month rather than spread over years. Total assets at the end of 2025 stood at CZK 10.2m.

Nothing in these lines points to a company losing money. Which is precisely why the petition deserves an explanation that the income statement cannot give.

Profit is recorded when earned, debts are paid in cash

The income statement follows accrual accounting. A sale counts as revenue when the work is done and invoiced, not when the customer pays. A cost counts when it is incurred, not when the money leaves the account. Over a long period the two views converge. Over a few months they can drift far apart.

Insolvency law looks at a different question. Under Czech rules a company is insolvent when it has several creditors and debts past their due date that it is unable to pay, or when its liabilities exceed the value of its assets. A strong margin does not protect against either test.

There are a few common ways a profitable small company ends up there. Customers may pay late, so the profit sits in receivables while wages, taxes and suppliers must be paid on time. Profit may have been paid out to the owners, leaving the company with little in the bank. Debts may stem from earlier years or from a single large dispute with one creditor. And a good 2025 says nothing about 2026, the year in which the petition was filed.

Which of these applies here, the accounts do not show. They do not split the CZK 10.2m in assets into cash and money still owed by customers, nor say how much the company owed and when it fell due. Those are the lines that would settle it. I would not read the petition as proof of insolvency, and I would not read the profit as proof of health. The two entries simply measure different things, at different moments.

The timing matters as much as the numbers

There is one more detail I would not ignore. The 2025 statements cover a year that ended in December 2025. The petition was filed well into the following autumn. Whatever happened to the company's cash in 2026 is outside these accounts entirely.

A balance sheet is a photograph taken on one day. A business can change a great deal between that day and the day someone reads it. For a supplier or a customer deciding whether to keep trading with a company, a year-old profit figure is a weak reassurance, however good the margin looks.

What to check in your own company

The gap between profit and cash is not specific to companies in trouble. It exists in every business, and it is usually discovered at the worst possible moment. You can measure it in an afternoon.

Start with your net profit for the last full year. Then open your bank statements and compare the cash balance at the start of the year with the balance at the end. If profit is high and cash barely moved, or fell, find out where the difference went: into unpaid customer invoices, into stock, into loan repayments or into distributions to owners.

Next, ask your finance team for an aged receivables report, the list of unpaid customer invoices sorted by how long they are overdue. Add up everything past its due date. Then put next to it every liability you must pay in the coming quarter: wages, social and health insurance contributions, VAT, rent, supplier invoices and loan instalments. If the overdue receivables are what stands between you and paying those bills, your profit is a promise, not a cushion.

Finally, look at concentration. If a single customer accounts for a large share of what you are owed, one late payment can turn a profitable month into a missed payroll.

HBR Work Agency's 2025 accounts describe a company that earned a solid margin. They do not describe a company that could pay whatever it owed in October 2026, and they were never meant to. A profit and loss account tells you whether a business made money; only the bank account tells you whether it still has it.