Every week I have the same conversation with at least one business owner.
Revenue is growing. Orders are coming in. Profit margins are decent. But there’s no money in the till. Salaries are paid with difficulty. Suppliers are being delayed. A new opportunity arises — and it can’t be seized.
The problem isn’t poor management. The problem is the failure to understand the difference between profit and cash.
Profit is calculated on an accrual basis. Revenue is recorded the moment you issue an invoice — even if the customer hasn’t paid yet. Cash is something entirely different: the real money in your bank account. Not the invoice — the collection.
“Profit is an opinion. Cash is a fact.”
Why Can Growth Be the Enemy of Cash?
Working Capital Trap: You give your customer 90 days to pay. You pay your supplier in 30 days. You finance the 60-day gap yourself. As turnover increases, this gap grows.
Investment Timing: CAPEX is paid upfront; returns come months later. The gap between cash-out and cash-in is the chronic problem of growing companies.
Inventory Buildup: Growth often requires higher inventory. But inventory sitting on shelves is frozen cash.
What Can Be Done?
Cash management is not a crisis tool. It’s a discipline that needs to be built into daily operations.
Key metrics to track: cash conversion cycle, days payable outstanding, days receivable outstanding, days of inventory.
The first step is to understand exactly where and why the cash squeeze is occurring. The second is to build a cash flow projection — not as an annual exercise, but as a living management tool.
Profitable companies can become cash-poor. But companies that understand cash dynamics can grow profitably and sustainably.
