Many profitable businesses fail because they run out of cash. Profit is an opinion on paper; cash flow is what pays salaries, suppliers and taxes.
Profit and cash flow are not the same
You can invoice a large sale today and still be short of cash for weeks while the customer takes time to pay. Tracking cash separately from profit is the first step to staying safe.
Four habits that keep cash positive
- Forecast weekly. A simple 13-week cash forecast shows problems before they arrive.
- Invoice quickly. Send invoices the day work is done and follow up on late payments.
- Negotiate payables. Ask suppliers for longer terms where possible.
- Keep a buffer. Aim for at least two to three months of operating expenses in reserve.
Cash is the oxygen of a business. Watch it every week, not every quarter.
When to ask for help
If your forecast keeps showing shortfalls, a review of pricing, costs and payment terms can usually uncover quick wins.
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