Cash Flow Management

Cash flow management

Profitable businesses fail from cash timing. Growth consumes cash before it produces it: you pay for inventory, staff, and acquisition now and collect later. Managing the gap is a distinct discipline from managing profit.

Method

1. Forecast weekly, not monthly, when runway is short. Monthly averages hide the week where payroll and a supplier payment coincide.
2. Model the collection cycle honestly. Use actual payment behaviour rather than stated terms, since customers pay when they pay (see payment-reconciliation).
3. Watch the working capital cycle. The time between paying for something and being paid for it is the cash the business must fund, and it grows with revenue.
4. Negotiate terms in both directions. Faster collection and slower payment each free cash, and the terms are often more negotiable than the price.
5. Keep a buffer sized to volatility. Enough to absorb a late payment from your largest customer, since concentration turns one delay into a crisis.
6. Distinguish a timing problem from a viability problem. Financing solves timing and worsens viability, and treating the second as the first is how businesses borrow into failure.
7. Track runway continuously with a trigger. A defined number of months at which you act, decided in advance rather than during the panic.

Boundaries

Cash management buys time; it cannot fix a model that loses money per unit (see unit-economics). Financing decisions have legal and personal guarantee implications requiring advice. Tax and statutory payment obligations are not flexible in the way supplier terms are.