Cash-Flow Consulting for Businesses That Are Profitable on Paper

Cash leaves before it arrives. That is the entire mechanism. Payroll goes out every two weeks. Materials are paid in 30 days. The customer pays in 55, or 70 if there is a retainage clause or a dispute about a change order. Every dollar of growth needs working capital to fund the gap, and the faster the company grows, the wider the gap gets. A company can grow itself into insolvency while posting record profit.

The second mechanism is timing that lives outside the income statement: loan principal, equipment purchases, owner distributions, tax deposits, insurance renewals, the annual software bill. None of them are expenses in the month they are paid, and all of them are cash. A forecast that starts from net income and adjusts for these is a forecast that is wrong in exactly the months that matter.

The third is seasonality. Landscapers, HVAC contractors, pool builders, and retailers earn most of their year in a few months and spend the rest of it waiting. The cash plan for a seasonal business is a different instrument from a monthly budget, and most seasonal businesses are running on the wrong one.

The forecast is a weekly view of every receipt and every disbursement for the next 13 weeks, built from the aging, the payables, the payroll calendar, the debt schedule, and the sales pipeline. It shows the low point, the week it happens, and what would have to be true for it to be higher. It is updated every Monday with actuals from the prior week, so the errors are visible and the model improves.

We build it in the first two weeks, and we run the meeting until someone in your company can. That person is usually the controller or the office manager, and the handoff is part of the scope. A forecast that only the consultant understands is a subscription, not a tool. The one we leave behind has a documented structure, a named owner, and a variance log that shows how right it has been.

The bank balance tells you what already happened. The forecast tells you which Friday to worry about. Only one of those is useful before Friday.

The cash conversion cycle is the number of days between paying for the work and getting paid for it: days of inventory plus days of receivables minus days of payables. For a $12 million company, taking 10 days out of that cycle frees several hundred thousand dollars that is currently on loan to customers and suppliers, at no interest, for no reason.

The days come out through discipline rather than cleverness. Invoices issued the day the work is done, with the deposit or progress billing the contract already allows. A collections routine that starts at day one with a confirmation, not at day 45 with an apology. Credit terms enforced with a hold rather than a hope. Inventory bought against a forecast instead of a hunch. Vendor terms negotiated once, in writing, and then actually used.

Payables are the gentlest lever. Many suppliers will extend from 30 to 45 days for a customer who pays on the day promised, and some offer discounts for early payment that beat the cost of the credit line. The controller's job is to know which is which and to pay each vendor on the right day, not the earliest one.

A line of credit is for the timing gap, not for losses and not for equipment. Companies that use it as a checking account discover the difference at renewal, when the bank asks why the balance never went to zero. We put the line on a plan: what it funds, when it is drawn, when it is repaid, and how the borrowing base is calculated so that the certificate is never a surprise.

Growth funding is the same question at a larger scale. If revenue is going from $8 million to $14 million next year, the working capital to support it has to come from somewhere: retained profit, a bigger line, term debt, an equity partner, or a slower growth plan. The forecast tells you how much and when. The CFO helps you weigh the sources, prepares the package, and sits in the meeting with the lender.

Two formats. The first is a defined project: build the 13-week forecast, measure the conversion cycle, install the collections and payables routines, put the credit line on a plan, train the owner of the model, and hand it off in roughly 90 days. The second is a monthly engagement from $3,500, where we run the weekly cash meeting, maintain the forecast, and manage the working-capital routines as a standing part of your finance function.

Both begin with an assessment: the last 24 months of financials, the aging reports, the debt and line agreements, the payroll calendar, and a first-pass forecast that shows the low point. Most owners learn something from that first pass that they did not want to know and are glad they do. Seasonal businesses get a 12-month cash calendar in addition to the 13-week view, because the danger is usually further out than 13 weeks.

When the cash problem turns out to be a profit problem, or a books problem, we say so. The forecast is very good at revealing that the job that was supposed to make 18 percent is making four. That is a different engagement, and we will point you to it rather than forecasting a loss with more precision.