Understanding the Importance of Cash Flow

82% of small businesses don’t fail because the idea was bad. They fail because the cash ran out. And not always in dramatic ways. You don’t need to be hemorrhaging money to have a cash flow problem. → Maybe your customers are paying 30, 60, or even 90 days late → Maybe your growth is outpacing your ability to collect cash → Maybe you're spending based on ARR, not what actually landed in your bank account These aren’t finance problems. These are timing and visibility problems. Founders love to brag about MRR. But MRR doesn’t pay payroll. Cash does. I’ve seen 7-figure run rate startups sitting on the edge of collapse because no one was watching: → Payment terms → Collections strategy → Vendor timing → That sneaky working capital cliff inside the forecast Sometimes the P&L looks great. You’re profitable on paper. But your bank account tells a different story. Here’s what I tell the founders I work with: Don’t treat cash flow as a bookkeeping task. Treat it like a core decision-making tool. → Is your next hire funded by actual cash or hopeful projections? → Are your runway calculations accounting for delayed receivables? → Have you stress-tested your next funding round against your burn rate? Cash flow isn't about being conservative. It’s about surviving long enough to win. Because startups don’t go broke from lack of vision. They go broke from timing mismatches, no scenario planning, and zero visibility. Map your cash flow. Stress-test it. Know your burn, your buffer, your breakeven. The stress? That’s optional. But the discipline? That’s survival. What’s the first thing you check when you feel something’s off in your business?

Cash Flow: The Heartbeat of Your SaaS Startup We're obsessed with growth. User numbers. Revenue charts. Market share. But what if we're measuring the wrong thing? In the SaaS world, cash flow is the true pulse of your business. It's not just about how much money comes in, but when it arrives and how long it stays. Let's talk about why smart tech leaders obsess over the green: 1. Survival Instinct 38% of startups fail because they run out of cash. For SaaS companies, this risk is even higher. Don't be a statistic! (CB Insights) 2. The Oxygen of Innovation Without steady cash, your brilliant ideas suffocate before they can breathe. 3. The Trust Factor Investors don't just buy your vision. They invest in your ability to turn that vision into a real business, not just burn through funding. 4. The Freedom to Say No Healthy cash flow lets you walk away from bad deals and toxic clients. 5. The Sleep-at-Night Effect Know that feeling of staring at the ceiling, wondering about next month's payroll? Cash flow is the antidote. Here's the paradox: The companies most obsessed with growth often overlook the very thing that enables it. Smart SaaS leaders know better. They understand that a 12-month Customer Acquisition Cost payback isn't just a metric—it's a growth accelerator. Allowing efficient startups to reinvest and expand more quickly (OpenView Venture Partners) So, what now? Start small. Pick one cash flow lever to pull this week: - Nudge a few monthly subscribers towards annual plans - Renegotiate a vendor contract - Set up that cash flow forecast you've been putting off The beauty of cash flow? Small actions compound quickly. What's one tiny step you'll take today to improve your cash flow position? Share below. Let's learn from each other.

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.

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.

How To Manage Cash Original Content Creator: Oana Labes, MBA, CPA (give her a follow) ---- Learn to Manage Cash. Here's why: To seize growth opportunities To protect against critical business risks To avoid financial distress and loss of business value To maximize shareholder value and return on investment. 🎯 Cash comes into a business from 3 main sources: >> Operations >> Investments >> Financing 🎯 Cash 1.0 is optimizing AR, AP and Inventory terms and turnover 🎯 Cash 2.0 is working on: >> Cash Flow Forecasting Techniques >> Effective Debt Management >> Capital Expenditure (CapEx) Cash Flow Optimization 🎯 Here are 4 critical reasons to remember for managing cash: 1️⃣ Seize Growth Opportunities: ⚫ you need agility to capitalize on acquisitions, expansions, or innovation ⚫ cash reserves may not be sufficient, so having a strategy to attract the incremental cash you need will allow you to take quick action on opportunities and give you a competitive edge. 2️⃣ Protect Against Critical Business Risks: ⚫ cash acts as a financial buffer against economic downturns, demand fluctuations, or supply chain issues ⚫ taking steps to ensure sufficient excess cash will help ensure your operational stability and strategic focus during unforeseen challenges 3️⃣ Avoid Financial Distress and Loss of Business Value: ⚫ effective cash management will prevent cash flow shortfalls, which are a leading cause of business failure. ⚫ the worst time to get other people's money (bank, investors) is when you actually need it ⚫ planning ahead will help you meet short-term liabilities (payroll, suppliers, debts) and avoid eroding business value and reputation. 4️⃣ Maximize Shareholder Value and Return on Investment: ⚫ strategic investments and operational decisions that drive long-term growth and profitability require advanced cash flow planning ⚫ managing cash effectively will always position companies favorable to generate and provide superior returns to shareholders What would you add? __________________ Original Content Creator: Oana Labes, MBA, CPA (give her a follow)

As a business, you MUST understand cash flow. One of the best tools for doing this is the Statement of Cash Flows. Let’s break it down by looking at an example. For 2021, Home Depot has what seems like a dichotomy: increasing earnings huge decrease in cash What gives? It starts with first understanding what Profit actually is. And Profit ≠ Cash. When looking at Accrual Financials, profit is a reflection of: • Revenue earned • Expense incurred So, how do we track cash? The best way is the Statement of Cash Flows. The Statement of Cash Flows formula is: Net Increase/Decrease of cash during period + Cash at beginning of period = Cash at end of period The net increase/decrease is broken down into 3 categories: • Operating Activities • Investing Activities • Financing Activities This data is compiled from the Income Statement & Balance Sheet. Looking at HD’s Operating Activities, we see Earnings and Cash from Operating are within ~$140,000 of each other. Not much to see… • Add back depreciation (not a real expense) • Subtract the increased inventory (used cash to buy) • Add back decrease in Accounts Payable So, we still have a mystery as we look at the Investing Activities. The negative number represents cash used to: • buy assets • acquire businesses The ($2,969) reinvested represents 53% of the $5,552 change in cash. So, partially solved! Last, we look at Financing Activities. Here we see A LOT of movement. We see cash was used to: • repurchase common stock • pay out dividends Cash used in financing > TOTAL operating cash. So, the story emerges. Home Depot used profits and debt payments to: • stock up on Inventory • buy Assets • repurchase Common Stock • pay out Dividends These are not good or bad in and of themselves. The context is what makes them good or bad. • Did they use more cash than they meant to? • Did they overbuy inventory or are they “gearing up” for future sales? • Did they have dividend commitments they couldn’t back out of? • Did they repurchase stock to benefit shareholders or to drive executive bonuses and hurt their long-term health? Repurchasing stock/dividends is equivalent to a private company distributing money. The question is: what’s the best use of the cash generated? Home Depot decided repurchasing stock and dividends were the answer. You get to decide if they were right or not. These insights are hard, if not impossible to see elsewhere on the financial statements. This is the magic of the SCF. No other statement can give you this level of detail behind cash movement. Hopefully, you've seen the value of the SCF. Thanks for reading! If you’re a business owner and want to be able to use your financials as a decision-making tool, check out my cohort (it starts March 11th): https://lnkd.in/gXMntDyz

Fundamental #16: THINK AND ACT LIKE AN OWNER  Spend company money wisely. Make decisions by asking yourself, “What would I do if this were my company? What would I do if this were my own money? Will this help the company to succeed?”    Well, you’d think this one would be an easy one for me to discuss. Surprisingly, it’s not… it’s hard to boil down all the wisdom you earn over 20 years of owning a company. A lot of it is gut feel, but if there is one principle I have that is easy to share: “Cash matters.”   A lot of folks don’t know that I started Infinitive without any loans… aside from PPP, we’ve never had any loans or debt. I started it leveraging personal savings and we lived off my wife’s income. But it helped that that the timing of our first project was aligned with the start of Infinitive. That gave me cashflow… or so I thought. I learned very quickly the ins and outs of a client’s procurement, invoicing, and payment processes. It took me 6 months to get my first check. We reduced our personal spend dramatically for a long time. I was confident Infinitive would get paid, but just didn’t know when. And once we got paid, believe it or not, I still didn’t pay myself anything. The money all stayed with Infinitive so that I could start hiring people aligned with selling new projects.     A few thoughts to re-enforce the importance of cash: - A company can be profitable, yet go out of business… why? Because they are profitable on paper, but no invoices are getting paid… they run out of cash. - A company lose millions of dollars a year and thrive… why? They have investors that believe in the company’s vision and continue to supply cash.  Amazon didn’t turn a profit for well over 10 years… and their stock price went up every year. - Cash is the oxygen and blood that enables a business to survive. Sales is the heartbeat, delivery is the sweat and tears… but without cash, a business dies.   We go to Vegas frequently for conferences. Whenever I go, somebody will ask if I plan to gamble at the casinos… I always laugh and say “no, we gamble every day at Infinitive… and I’ll take those odds over any casino any day”… we bet every day on each Infinitivian… on whether we hire somebody, who we put on a project, etc. And luckily, thanks to our team of Infinitiivians, we’ve won way more than we’ve lost.   So, whenever we spend company money, we should always ask, “Is the likely return on this spend positive and good?”   Be great… and be frugal!! 😊 #CEOInsights #DensDeepThoughts

How can a business get money with bad credit? Yesterday, I connected with an exceptional finance expert with extensive experience. We discussed our ideal clients and the services our companies provide. He posed a thought-provoking question that took me back to my years of credit training. He asked if lenders would loan to a company with bad credit scores and financials. I shared a valuable lesson from one of my CROs at #GECapital, where I began my career in corporate finance as an underwriter of structured loans to general manufacturing #midmarket companies. This CRO, let's call him Ulysses, once asked, "How do you underwrite a cash flow-based loan?" Ten hands shot up, and almost in unison, they answered, "Cash flows." Correct. Then he asked, "How do you underwrite an asset-based loan?" Again, ten hands went up, and they all said, "Assets." WRONG! Ulysses explained that we should always underwrite based on cash flows because it informs the company's creditworthiness and helps structure the asset-based borrowing base and covenants. Cash flow is one of the most crucial aspects of any business and the #1 exit strategy for a lender. So, even if your business has bad credit, there's still hope. Here's how: ✓ Focus on Cash Flow: Lenders are more willing to overlook bad credit if you can demonstrate strong, consistent cash flow. This shows your ability to repay the loan. ✓ Present a Solid Business Plan: Show lenders that you have a clear strategy for maintaining and growing your cash flow, and that actively managing cash is part of your business strategy. ✓ Consider Alternative Lenders: Traditional banks may be strict, but there are alternative lenders and financial institutions that specialize in working with businesses with less-than-perfect credit. As a business owner or founder: ☞ You need cash to scale your company. ☞ You need cash to pay your employees and suppliers. ☞ You need cash to survive when markets decline or big customers leave (this is guaranteed to happen at any stage of your business). ☞ You need to treat cash as an integral part of your business strategy. It’s no surprise that the #1 reason companies go bankrupt is running out of CASH! There’s no silver bullet other than cultivating a cash-disciplined culture in your company. One of the best ways to achieve that is by running a weekly 13-week cash flow forecast exercise. Check out this link for more: https://lnkd.in/dY3dpWWk. If you want to know more, book a call, and let’s discuss how my 13-week cash flow forecast service can help your business thrive. #CashFlow #BusinessFinance #SmallBusiness #StartupFinance #BusinessGrowth #FinancialPlanning #CFO #ScalingUp #CashFlowManagement #BusinessStrategy #Entrepreneurship #FinanceTips #FundingSolutions

Your numbers look amazing on paper… but something feels off with your cash flow. This disconnect isn’t just confusing—it’s dangerous. You’re making decisions based on skewed data. Those marketing investments? They could be draining resources you don’t actually have. That expansion plan? It might push your cash reserves to the limit. Your reports show revenue growth, but operational costs are blurred. Expenses appear in the wrong periods, and income gets recognized too early. This fog of misaligned numbers hides your true financial position. Here’s your path to clarity: 1. Review expense timing 2. Match revenues with related costs 3. Track prepaid expenses accurately 4. Implement accrual schedules 5. Monitor cash impact of adjustments These steps reveal your real financial health. You’ll see when expenses hit and how they impact cash flow, grounding every decision in accurate data. #adjustingjournalentry  #finance  #businessandaccounting

I learned firsthand that cash is not just comfort, it is critical. In tough markets, your reserves and cash flow determine whether you survive or stall out. Here Is Why It Matters: 1: Reserves buy you time. Market cycles do not follow your timeline, but cash gives you breathing room. 2: Operating with thin margins is gambling. One insurance spike or vacancy slump can wipe you out. 3: Investors trust you more when you plan for risk, not just reward. Here Is What to Do Instead to Get Results: Step 1: Always underwrite with at least six months of reserves, no exceptions. Step 2: Check insurance quotes multiple times before closing. Rates change fast and often. [And for that matter vet every single item on the p&l.] Step 3: Align your debt with your business plan - fixed rate, short-term or long, needs to match your exit. I come from commercial lending, and I’ve underwritten hundreds of deals. I’ve seen the ones that failed, and every time, they were low on reserves and high on optimism. Cash and cash flow is what helps carry you through downturn times. Do you agree?