Definition
The net movement of cash into and out of a business over a period.
Why it matters
Profitable companies can still fail from poor cash flow when customers pay slowly.
Where it shows up in a deal
Funders ask for a short-horizon cash forecast, typically thirteen weeks, alongside the aging and the financials. It is the document that shows whether the shortfall is a timing gap a receivables facility can close or a structural loss that financing would only accelerate. That distinction is usually obvious from the forecast and almost never from the income statement.
What it affects
- Payroll, fuel and supplier payments land weekly while invoices settle in 30 to 90 days.
- Every dollar of growth on long terms consumes cash before it produces any.
- A single large customer paying two weeks late can outweigh a month of profit.
- Lumpy inflows force a cash buffer sized for your slowest payer, not your average one.
A worked example
A company bills $500,000 a month at a 20% gross margin, pays its costs within 15 days and collects on day 52. Growing billings by $125,000 a month adds $100,000 of cost that lands about five weeks before the matching revenue, so each month of growth absorbs roughly $100,000 of cash even though every job is profitable.
The common mistake
Related terms
- Working CapitalCurrent assets minus current liabilities — the cash available to run daily operations.
- Cash Conversion CycleThe number of days between paying for inventory and collecting cash from customers.
- Days Sales OutstandingThe average number of days it takes to collect payment after a sale.
- Accounts Receivable FinancingFunding that advances cash against a company's unpaid B2B invoices, repaid when customers pay.
Questions about how cash flow affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
