Cash Flow Management Tips

Cash Flow Formulas 🏦 Cash flow is EVERYTHING in business. It doesn't matter how much profit you show on paper...if you can't manage cash, you won't survive. Let's break down the essential formulas you need to know 👇 ➡️ BASIC CASH FLOW • BASIC OCF 💡 Shows your true operational cash generation. Strips away all accounting entries to reveal pure cash movement in your core business operations. 🔢 Net Income + Depreciation & Amortization - Changes in Working Capital • DETAILED OCF 💡 Captures every non-cash movement in your business. Works like Basic OCF but gives you a complete picture by factoring in ALL items affecting your cash position. 🔢 Net Income + D&A + Non-cash Items ± Changes in Working Capital • DIRECT METHOD OCF 💡 Tracks pure cash movement through operations. Perfect for businesses wanting to see raw cash flows without accounting complexity. 🔢 Cash from Customers - Cash Paid to Suppliers - Operating Expenses - Taxes • BASIC FCF 💡 Reveals cash available for growth. Essential for understanding exactly how much money you have for expansion after covering all operational needs. 🔢 Operating Cash Flow - Capital Expenditures ➡️ EFFICIENCY METRICS • CASH CONVERSION CYCLE 💡 Measures how fast you turn operations into cash. Combines three critical metrics to show your complete cash efficiency story. 🔢 DIO + DSO - DPO • DAYS INVENTORY OUTSTANDING 💡 Shows inventory efficiency. Lower numbers win unless you're strategically stocking up for high-demand periods. 🔢 (Average Inventory ÷ COGS) × 365 • DAYS SALES OUTSTANDING 💡 Reveals collection speed. The true test of how well your collection process works and how quickly customers actually pay. 🔢 (Average AR ÷ Revenue) × 365 • DAYS PAYABLE OUTSTANDING 💡 Tracks payment timing. Balances cash preservation with maintaining strong supplier relationships. 🔢 (Average AP ÷ COGS) × 365 ➡️ RETURN METRICS • CASH FLOW ROI 💡 Measures return on cash investments. Critical for evaluating project success and making investment decisions. 🔢 Cash Flow from Operations ÷ Investment • CASH FLOW ROA 💡 Shows asset efficiency. Essential for asset-heavy businesses to evaluate their operational performance. 🔢 Operating Cash Flow ÷ Average Total Assets • CASH FLOW ROE 💡 Reveals shareholder returns. Crucial for public companies and fundraising efforts to demonstrate value creation. 🔢 Operating Cash Flow ÷ Average Stockholders' Equity ➡️ WORKING CAPITAL • NET WORKING CAPITAL 💡 Shows operational liquidity. The foundational metric that answers whether you can keep the business running smoothly. 🔢 Current Assets - Current Liabilities • OPERATING WORKING CAPITAL 💡 Measures core business efficiency. Excludes cash and debt to focus purely on operational performance. 🔢 Current Assets (exc. cash) - Current Liabilities (exc. debt) === These formulas drive smart business decisions. Which cash flow metric are you using the most? Drop your insights below 👇

Many companies don’t struggle because of profits. They struggle because of cash flow. Entirely preventable, but here’s the kicker: Too many leaders rely on historical metrics—net income, EBITDA, last quarter’s revenue—thinking they reflect financial health. They don’t. Because profit tells you where you’ve been. Cash flow tells you where you’re going. ➡️ Learn to analyze a cash flow statement in 10 steps and never miss another red flag again: https://lnkd.in/e2JXiUK6 ✔ Profit is a historical number. It tells you how the business performed—not whether it can navigate through what’s coming next. ✔ Cash flow is real-time financial health. It shows how money moves in and out, revealing whether you can meet obligations today. ✔ Forecasted cash flow is future strength. Because past performance doesn’t guarantee future liquidity. If you don’t know what’s coming, you’re flying blind. Here's why companies get this wrong: 1️⃣ They trust EBITDA instead of tracking real cash. → EBITDA strips out expenses like interest and taxes, but those bills still need to be paid. 2️⃣ They assume profit = cash in the bank. → Profit looks good on paper, but if revenue is tied up in receivables, you have no liquidity. 3️⃣ They don’t forecast future capital needs. → It’s not enough to know what happened last quarter—cash planning must include future payment obligations, growth investment plans, and economic shifts. Here's the right way to measure financial strength: 1. Operating Cash Flow → Are you generating real cash, or just showing paper profits? 2. Real Free Cash Flow → After investments, do you have excess cash, or are you overextending? 3. Cash Conversion Cycle → How long does it take to turn revenue into usable cash? 4. Debt-to-Cash Flow Ratio → Can you service obligations, or is debt outpacing liquidity? 5. Rolling 16-Week Cash Flow Forecast → Are you prepared for short-term risks, or just hoping for the best? The Bottom Line: ↳ Historical profit tells you where you’ve been. ↳ Current cash flow tells you where you are. ↳ Cash flow forecasts tells you your future. 📌 Make 2025 your best year yet and master financial leadership ↴ ▷ Enroll in my 5 on-demand video courses and save 50%+ with the bundle: https://bit.ly/4bTdu8T ▷ Join the April cohort waitlist for my 6-week Financial Intelligence Program: https://bit.ly/3ZCI0kr ♻️ Like, Comment, Repost if this was helpful. And follow Oana Labes, MBA, CPA for more.

Most business owners run their companies off the wrong number. Revenue looks great. Profit looks fine. But cash in the bank? Not adding up. That is the Iceberg Illusion: you are making decisions based on the 10% above water and ignoring the 90% below. Here is what lies beneath: • Debt obligations • Tax surprises • CapEx drains • Working capital traps The fix? Track Steady-State Cash Flow: the real, recurring cash you generate after covering core ops, taxes, CapEx, and debt. Profit is theoretical. SSCF is survival. Start tracking it monthly. Then run your business off of it.

New client? The first model I build is 𝙣𝙤𝙩 a Three Statement Model... Instead, it's a 𝗖𝗮𝘀𝗵 𝗙𝗼𝗿𝗲𝗰𝗮𝘀𝘁. ~~~ 📌𝗦𝘁𝗮𝗿𝘁 𝗼𝗻 𝘆𝗼𝘂𝗿 𝗼𝘄𝗻: grab a personal cash flow template here 👉 https://lnkd.in/edmwgYCv ~~~ 𝗧𝗶𝗺𝗶𝗻𝗴? 13 weeks, 4 weeks, 7 weeks? Doesn't matter. I just need a general sense of what cash will do in the short term. When will I collect payments? Can I pay vendors? Can I make payroll? 𝗔 𝗙𝗿𝘂𝘀𝘁𝗿𝗮𝘁𝗶𝗼𝗻 What drives me nuts about these forecasts? They have become so overly "professionalized" that no one understands them. I just want to know: "What will my bank account look like next week?" "How about two weeks from now?" Enough of the fluff. 𝗤𝘂𝗶𝗰𝗸 𝗦𝘁𝗮𝗿𝘁 𝗚𝘂𝗶𝗱𝗲 Open a spreadsheet and whip this thing together. You build it like this: 1. Stuff that comes in -- minus -- 2. Stuff that goes out = What you have left. (repeat for next week) (💡pro tip: don't forget to add "float" to your beginning balance = checks that have been cut but not yet cashed) 𝗣𝗶𝗰𝘁𝘂𝗿𝗲 𝗧𝗶𝗺𝗲 In the example image I'm focused on three things: 1. Mapping out the past 2. Making thoughtful estimates about the future 3. Figuring out if I have shortfall (so I can do something about it 𝙣𝙤𝙬) 𝗘𝘅𝘁𝗿𝗮 𝗧𝗶𝗽𝘀 💡𝘗𝘳𝘰 𝘵𝘪𝘱 1: have unknowns? Just build a line called "unknowns" to make things conservative. 💡𝘗𝘳𝘰 𝘵𝘪𝘱 2: forecast expenses early, receipts late (again, make it conservative) 💡𝘗𝘳𝘰 𝘵𝘪𝘱 3: 𝗳𝗼𝗿𝗴𝗲𝘁 𝗮𝗯𝗼𝘂𝘁 𝘄𝗲𝗲𝗸𝘀, 𝗷𝘂𝘀𝘁 𝗯𝘂𝗶𝗹𝗱 𝗶𝘁 𝗯𝘆 𝗱𝗮𝘆. 𝗟𝗲𝗮𝗿𝗻 𝗶𝗻 𝗬𝗼𝘂𝗿 𝗦𝗽𝗮𝗿𝗲 𝗧𝗶𝗺𝗲 The best way to practice? Start with your own life: + paycheck in - expenses out Build a short forecast, maybe 4 weeks at most. How'd you do? If you were even 𝘥𝘪𝘳𝘦𝘤𝘵𝘪𝘰𝘯𝘢𝘭𝘭𝘺 close, you have the raw skills to do this analysis at the business level. 𝗧𝗟;𝗗𝗥 1. Map out history 2. Make conservative estimates about the future 3. Make a plan now ~~~ 👋 Hey, I'm Chris Reilly, and I teach Financial Modeling based on real Private Equity and FP&A experience. 📌 See Financial Modeling Courses 👉 https://lnkd.in/eG_uVhsE

Tariffs: They’re not just headlines. They’re hitting / tussling your wallet—and your budget, money goals. We’ve all seen the headlines—tariffs going up and down, percentages changing by the day—but how does that impact you? The cost of living keeps rising, and those small (but real) changes in your budget are often directly linked to these shifts. I’ve already broken down the 4 Cs of handling tariffs (Cost, Cushion/Cash Flow, Correction, and Calm), but here’s a quick action plan you can follow to stay ahead of the curve: 1. Audit Your Spending:
Look at the last 3 months and track what’s been creeping up in cost. For the next 3 months, expect to see shifts—and use that to adjust your budget. 2. Know Your Cash Flow’s Highs and Lows:
Map out when your cash flow is flowing strong and when it’s tight. Move that extra money into a high-yield savings account, building a sinking fund to soften the impact of price increases. 3. Rethink Your Budgeting:
Tariffs may change the prices of everyday goods, but you can change how you spend. Shop smarter, look for alternatives, and delay purchases to keep your goals intact. Tariffs may fluctuate, but you don’t have to. As things get unprecedented, let’s stay focused as much as possible to not only our paper but our persistence — to stay balanced. #tariffs #personalfinance #LIPostingDayApril

“The business has $250K in cash—why do I need more for working capital?” That’s what a new buyer asked me last week. Fair question. But here’s the thing: Working capital isn’t just about what’s in the bank. It’s about the timing of cash in vs. cash out. And that looks VERY different depending on the business. 🛠 HVAC? You might buy parts upfront, finish the job weeks later, and THEN invoice. Net-30 if you’re lucky. 👨💻 eCom? Customer pays immediately. Credit cards settle in a day or two. Super tight cycle. 👷♂️ Staffing or B2B services? Payroll every 2 weeks. Clients pay in 60. That gap? That’s your problem now. That’s the cash conversion cycle. And if you don’t plan for it, it’ll punch you in the mouth after closing. 👉 This is why working capital matters. 👉 This is why a “profitable” business can still run out of cash. So no, that $500K doesn’t mean you’re safe. You need to understand: ✅ How much goes out before cash comes in ✅ How fast the receivables turn ✅ If you need a line of credit, or if retained earnings will do the job And remember… 📉 The bank might not finance working capital. 📅 The seller might forget to warn you. 😬 But once you own it—it’s on you. Before you close, ask this: Can this business survive the gap between invoices and income—without me writing personal checks?

I’ve built companies through 3 major recessions, including the Great Financial Crisis. I've seen the collapse of Bear Stearns, Lehman Brothers, and many others. If Trump doesn't change course, that is where we are headed... So, how should we react now that the US is reshaping the global economic order and triggering a self-inflicted recession?  The playbook for navigating the new tariff regime is straightforward. The fundamental characteristic of this new world is uncertainty. And Profitable Efficient Growth (PEG) is the proper antidote to uncertainty. Here's how executives can successfully navigate the next 9 months (broken out by MACRO, BUSINESS and MINDSET lessons): MACRO 1. Review your supply chain and understand component pieces and what exposure you have to various suppliers and customers. 2. Review your customer base by geography and understand your exposure, not just for tariffs but for retaliatory behavior impacted by country-specific animus. 3. Understand currency exposure and estimate impact of dollar-denominated contract erosion. BUSINESS 1. Improve the frequency of your forecasting and ensure you’re forecasting cash, expenses and revenue on at least a monthly basis. 2. Develop a clear POV on fixed vs variable costs and leverage non-FTE hiring for maximum flexibility in case things go poorly. 3. Review your messaging to illustrate why your product is essential in a downturn. Enable your Sales and CS teams with talking points so they can lean into price and budget when the objection arises. 4. Make growth investments but ensure they're tranched. Avoid more than 2x-ing any growth investment. Layer in 1.5x investments, monitor for performance, and then invest again. 5. Ensure you're not over-extended. Leaning too far into growth on the expectation that things will go up may create financial jeopardy later this year. MINDSET 1. Leverage healthy mindset practices to ensure you remain calm and clear including meditation, exercise, and visualization. 2. Understand: Every crisis is an opportunity for the confident and those willing to lead. 3. Pause and ask yourself the question, “How is this a huge opportunity for our business?”. Journal what comes to you from a focused session. 4. Project clarity and confidence to your team. Let them know your organization has intentionally been designed to weather storms like these. We just got out of the post-COVID tech recession. These lessons should be fresh in our minds but they bear repeating. The folks that lectured us that we should stop thinking about margins and profitability were premature. We all need to be smart, responsible and prudent. This doesn't mean fearful. And this doesn’t mean we shouldn’t try to grow. But it does mean it’s not the time for foolishness. We need to understand our market and our exposure. We need to design our businesses for anti-fragility. Our bets need to be sized. And we need to find the opportunity in the chaos.

$250k/mo burn. 3 months runway left. No VC cash. "You don't need a miracle, you need a plan". That's what I told a startup founder who hired me as a CFO. Runway increased from 3 to 9 months. Here is how: ▶️ The crisis: • Baseline burn: $250k/month • Cash in bank: $750k → 3 months of runway • No VC lifeline: out of question for now. • Goal: buy time to hit 6+ months runway and qualify for non-dilutive capital. • Acknowledging that this situation is a failure in terms of planning. ▶️ The playbook: 4 levers to pull We attacked burn from all angles: cost cuts, cash flow optimization, revenue acceleration, and non-dilutive financing. 1. Cost reduction: saved $80k/month Why? Fixed costs are the easiest to control quickly. Tactics: • Cloud infrastructure (savings: $25k/month): => Renegotiated AWS commit discounts (locked in 3-year terms for 40% savings). • Software stack (savings: $15k/month): => Audited 35 tools. Cut duplicate/redundant apps. => Demanded 20% discounts from vendors by threatening cancellations (yes, dirty). • Team restructuring (savings: $40k/month): => Reduced headcount by 12% (underperforming roles). => Shifted to contractors in lower-cost regions. => Paused all non-critical hires. 2. Better payment terms: unlocked $20k/month in cash flow Why? Stretch payables without damaging relationships. Tactics: • Vendor negotiations: => Extended Net-30 to Net-60 terms with 4 key vendors. • Customer Collections: => Hired a part-time collections specialist to chase late payments (>30 days). 3. Faster sales cycles: added $20k/month in Revenue Why? Speed = cash. Tactics: •Removed friction: => Cut demo steps from 3 calls to 1. => Launched a self-service “Start Now” plan (no sales call, 14-day trial). • Upsold existing customers: => Targeted inactive users with a “reactivation” campaign (12% converted to paid add-ons). 4. Non-dilutive financing: added $300k in Cash Why? Buy runway without giving up equity. Tactics: • Revenue-based financing: => Secured $200k at 8% fee (repay 5% of monthly revenue until 1.4x repaid). • AR factoring: => Sold $100k of outstanding invoices (90% advance rate, 3% fee). ▶️ Results • New monthly burn: $130k/month (48% reduction). • Cash balance after 3 months: 750k(initial)−390k (3 months burn) + 300k(financing)=660k • Extended Runway: 660k/130k = 5+ months → 9+ months with financing. ▶️ Key takeaways for founders • Cut fast, cut deep: Focus on high-impact fixed costs first (cloud, payroll, SaaS tools). • Cash flow > Accounting profit: Stretch payables, pull forward receivables. • Simplify to accelerate: Remove friction in sales, pricing, and onboarding. • Get creative with financing: Revenue-based loans, prepayments, and AR factoring buy runway. You don’t need a miracle — you need a plan. If you’re staring down a single-digit runway, DM me. Let’s fix this.

Our CFO recently had this conversation with a client: "My P&L shows $50k profit last month but I only have $12k in the bank. Where's my money?" Sound familiar? Here's why this happens: Net Profit ≠ Cash Flow Example: $100k Revenue -$50k Expenses =$50k Profit But wait... - $20k sitting in Stripe (not transferred yet) - $15k in unpaid invoices - $10k quarterly tax payment due - $8k in software charges pending So despite having $50k profit... only $12k in cash is available. Again, just remember that net profit doesn't equal cash flow. To actually know where you stand, track these 3 things: - Actual cash position - Expected incoming payments - Upcoming obligations Profit is vanity, cash flow is sanity.

Late payments remain one of the biggest threats to growth for small Professional Services firms. Cash flow isn’t just a financial issue, it’s a strategic constraint on growth. Many firms run high-margin but cash-intensive models. When clients take 60, 90, or even over 120 days to pay, smaller firms effectively end up financing their clients’ businesses, covering payroll, rent, and operating costs long before invoices are settled. We’ve seen firms with real momentum lose pace, not due to a lack of opportunity, but because they were unintentionally acting as their clients’ bank. We’ve felt it ourselves, even one delayed payment from a client can tie up capacity, push back hiring plans, and stall investment, all while senior leadership is focused on chasing cash instead of driving growth. The ripple effects are real. Every dollar locked up in receivables slows decision-making. Every cash gap limits appetite for risk. And too often, those same firms are forced to delay payments to their own suppliers, creating a knock-on effect across the industry. Some firms turn to invoice factoring or short-term financing, but both come at a cost, eroding margins and increasing long-term pressure. And in a competitive market, smaller firms often lack the leverage to dictate terms. The firms that scale sustainably do so with discipline. They set clear expectations, diversify their client base, and design operating models that protect working capital. They don’t let late payments dictate performance, or subsidize someone else’s balance sheet. It’s time the industry stopped treating payment discipline as optional. This isn’t just about smoother cash flow, it’s about resilience, accountability, and long term viability.