Separate profit from cash
Recognising revenue does not mean collecting it on the same day. When supplier payments and payroll come before customer receipts, growth requires additional funding. Profitability and liquidity should be read together, with attention to timing.
Look at the full operating cycle
Credit terms, collections, inventory levels and payment timing determine how much cash is tied up in operations. Improving invoicing or resolving a customer dispute may be as relevant as obtaining a bank facility.
Build a forecast that can be updated
Start with a short-term forecast grounded in expected cash movements. Distinguish confirmed amounts from estimates and assign responsibility for updates. Discuss potential gaps early, including scenarios for delayed collections or higher payments.
This article provides general educational information. Appropriate decisions depend on each organisation’s circumstances and data.