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Cash Flow Workshop

Colin King, CPA, CFA

info@profitmastery.net | www.profitmastery.net

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Where we are

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Step 4 of the Financial Operating System.

1

Plan properly

2

Monitor financial position

3

Cost structure (price, volume, cost)

4

Manage cash flow

TODAY

5

Manage growth

6

Capital management

7

Plan for transition

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Agenda

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1

Foundations

How cash flow works · accrual vs. cash · profit vs. cash flow

2

Anatomy of a cash flow statement

Operating, investing, financing · direct vs. indirect

3

Managing cash flow

Weekly cash tracker · 13-week cash forecast (13WCF)

4

Strategy & tactics

Liquidity and runway · strategies, tactics and levers

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4

My goal for today

Make cash simple + fast + easy

Zero accounting knowledge needed, fast enough to do in 30 minutes a week, you don’t even need a set of books.

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Foundations

The cash flow equation
How cash flow works
Accrual basis vs. cash basis
Profit vs. cash flow, and what drives the gap

5

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Defining cash flow

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Beginning

cash

+

Cash

inflows

−

Cash

outflows

=

Ending

cash

CASH FLOW

Every report we build today is this equation on a different interval: daily, weekly, monthly, 13 weeks.

If you can reconcile this equation from your bank account, you understand your cash flow.

Beginning cash + cash inflows − cash outflows = ending cash.

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How cash works

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CASH IN (SOURCES)

Customer collections (sales)
Loan proceeds
Owner contributions
Asset sales, refunds, interest

CASH OUT (USES)

Inventory purchases
Credit card bills
Payroll, rent, vendor payments
Loan payments
Equipment and capex
Owner distributions, taxes

Bank account

KEY POINT The bank account, not the P&L, is the primary source of truth for cash flow.

Money moves in and out of the bank account.

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How is profit different from cash flow?

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Accrual vs. cash-basis

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ACCRUAL BASIS

Earned / incurred

Records revenue when earned and expenses when incurred, regardless of when cash moves.

Matches sales and expenses (better for measuring profit)
Shows how well the business is doing (profit)
Misleading view of cash flows

CASH BASIS

Timing

Records money when it hits or leaves the bank. Managing from the bank balance.

Matches reality in the bank (better for survival)
What your bank statement shows
Misleading view of profits

EXAMPLE Invoice $10,000 on March 15, customer pays May 2. Accrual revenue = March. Cash flow = May.

Question is “when” to use them, not which one.

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Accrual vs. cash

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You clock in for 8 hours of work on Monday. Payday is next Friday. When do you see profit, and when do you see cash?

Monday	Tuesday	Wednesday	Thursday	Friday
1 8 hours worked�(accrual profit)	2	3	4	5
8	9	10	11	12 Payday�(cash flow)

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Profit vs. cash flow – key drivers

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01

Receivables timing

Revenue is booked, but you haven't collected it yet.

02

Inventory build

You pay for stock before you sell it.

03

Payables timing

When you actually pay suppliers and credit cards.

04

Loan principal

Only interest hits the P&L. Principal still leaves the bank.

05

Owner distributions

Never on the P&L, often a major outflow.

06

Equipment purchases

Expensed slowly through depreciation, paid for all at once.

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Fund business ($100) and buy inventory ($20)

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P&L
Sales	-
COGS	-
Gross Profit	-
Overhead	-
Depreciation	-
Net Profit	-

Balance Sheet
Cash	$80
A/R	-
Inventory	$20
Equipment	-
Total Assets	$100
A/P	-
Debt	-
Equity	$100
Total L&E	$100

Cash Flow
Profit	-
Depreciation	-
A/R	-
A/P	-
Inventory	($20)
Op. Cash Flow	($20)
Equity	$100
Capex	-
Non-Op. Cash Flow	$100

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Make a sale ($25) on credit (A/R)

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P&L
Sales	$25
COGS	($10)
Gross Profit	$15
Overhead	-
Depreciation	-
Net Profit	$15

Balance Sheet
Cash	$80
A/R	$25
Inventory	$10
Equipment	-
Total Assets	$115
A/P	-
Debt	-
Equity	$115
Total L&E	$115

Cash Flow
Profit	$15
Depreciation	-
A/R	($25)
A/P	-
Inventory	($10)
Op. Cash Flow	($20)
Equity	$100
Capex	-
Non-Op. Cash Flow	$100

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Buy equipment ($25) and make a sale ($25)

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P&L
Sales	$50
COGS	($20)
Gross Profit	$30
Overhead	-
Depreciation	-
Net Profit	$30

Balance Sheet
Cash	$55
A/R	$50
Inventory	-
Equipment	$25
Total Assets	$130
A/P	-
Debt	-
Equity	$130
Total L&E	$130

Cash Flow
Profit	$30
Depreciation	-
A/R	($50)
A/P	-
Inventory	-
Op. Cash Flow	($20)
Equity	$100
Capex	($25)
Non-Op. Cash Flow	$75

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Reconciling profit & cash flow

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Cash Flow Statement

P&L

So how do we bridge profit and cash flow?

Statement of Cash Flows

The third financial statement tells us where the profit went.

We can then "walk" from:

sales → profit → cash flow

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Anatomy of a cash flow statement

The three sections: operating, investing, financing
Sources and uses of cash
Direct method vs. indirect method

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Sections of a cash flow statement

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OPERATING

Does the core business generate cash?

Customer collections
Payroll, rent, vendors
Taxes and interest

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Operating cash flow

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Cash from your core business activity. It starts with profit and reconciles profit to cash flow.

Start with profit
Add back non-cash expenses like depreciation
Adjust for working capital: receivables, inventory, payables

FORMULA Operating cash flow = profit + depreciation ± working capital changes

Indirect method
Profit	50,000
Depreciation	10,000
Change in receivables	(10,000)
Change in inventory	5,000
Change in payables	5,000
Operating cash flow	60,000

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Sections of a cash flow statement

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OPERATING

Does the core business generate cash?

Customer collections
Payroll, rent, vendors
Taxes and interest

INVESTING

What are we building or buying?

Equipment purchases
Property and vehicles
Sale of assets

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Investing cash flow

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Cash from long-term asset investments and divestitures.

Long-term asset investments (outflows)
Divestitures (inflows)

ALSO CALLED

Typically referred to as "capital expenditures" or capex.

Indirect method
Profit	50,000
Depreciation	10,000
Change in receivables	(10,000)
Change in inventory	5,000
Change in payables	5,000
Operating cash flow	60,000
Capital expenditures	(25,000)
Assets sold	5,000
Acquisitions	–
Investing cash flow	(20,000)

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Sections of a cash flow statement

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OPERATING

Does the core business generate cash?

Customer collections
Payroll, rent, vendors
Taxes and interest

INVESTING

What are we building or buying?

Equipment purchases
Property and vehicles
Sale of assets

KEY POINT Operating cash flow = core business activity. Investing + financing = non-operating cash flows.

FINANCING

How is the business funded?

Loan draws and payments
Owner contributions
Owner distributions

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Financing cash flow

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Cash from your funding sources: debt and equity.

Debt: borrowings (inflows) or repayments (outflows)
Equity: new investment (inflows) or distributions (outflows)

KEY POINT Think of these as your funding sources.

Indirect method
Profit	50,000
Depreciation	10,000
Change in receivables	(10,000)
Change in inventory	5,000
Change in payables	5,000
Operating cash flow	60,000
Capital expenditures	(25,000)
Assets sold	5,000
Acquisitions	–
Investing cash flow	(20,000)
Debt borrowed	5,000
Debt principal payments	(20,000)
Dividends	(10,000)
Equity raised	–
Financing cash flow	(25,000)

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The cash flow statement

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Add the three sections together to get the net change in cash.

Indirect method
Profit	50,000
Depreciation	10,000
Change in receivables	(10,000)
Change in inventory	5,000
Change in payables	5,000
Operating cash flow	60,000
Capital expenditures	(25,000)
Assets sold	5,000
Acquisitions	–
Investing cash flow	(20,000)
Debt borrowed	5,000
Debt principal payments	(20,000)
Dividends	(10,000)
Equity raised	–
Financing cash flow	(25,000)
Change in cash	15,000

OPERATING + INVESTING + FINANCING

60,000 − 20,000 − 25,000

= $15,000 net change in cash

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Sources & uses of cash

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SOURCES: WHERE CASH COMES FROM

Customer collections · operating
Deposits and prepayments · operating
Sale of equipment or assets · investing
Loan proceeds / line of credit draws · financing
Owner contributions · financing

USES: WHERE CASH GOES

Payroll, rent, vendors, inventory · operating
Taxes and interest · operating
Equipment, vehicles, property · investing
Loan principal payments · financing
Owner distributions · financing

HABIT Review sources and uses in your monthly and annual financial review. Later, this becomes your monthly cash budget.

Every bank transaction is a source or a use in one of the three sections.

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Sources & uses of cash

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What's happening at this company?

Where did money come from?
Where did money go?
How did this company increase cash by $100k?

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The cash flow statement is confusing.

Is there a better way to manage cash flow?

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The big secret

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Cash flow is hard

The business world wants you to believe you need specialized knowledge to have it.

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Cash flow is hard

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Are any of these businesses generating cash?

BUSINESS A

Cash receipts

$100

Payroll

($50)

Expenses

($35)

Cash flow

$15

BUSINESS B

Cash receipts

$100

Payroll

($75)

Expenses

($45)

Cash flow

($20)

BUSINESS C

Cash receipts

$100

Payroll

($75)

Expenses

($55)

Cash flow

($30)

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Every business generates cash flow

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Each business has $100 in cash receipts from customers.

BUSINESS A

Cash receipts

$100

Payroll

($50)

Expenses

($35)

Cash flow

$15

BUSINESS B

Cash receipts

$100

Payroll

($75)

Expenses

($45)

Cash flow

($20)

BUSINESS C

Cash receipts

$100

Payroll

($75)

Expenses

($55)

Cash flow

($30)

Yes… All three bring in $100, they just choose to spend it differently. Cash flow isn't hard to generate. It comes down to how you allocate it.

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The big secret

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Myth

Cash flow is hard

The business world wants you to believe you need specialized knowledge to have it.

Truth

Every business generates cash

Reframe your thinking. EVERY business generates cash flow (cash receipts from customers) and it comes down to how you spend it.

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Direct method of cash flow

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Start with cash receipts from customers, then subtract cash paid for operating activities.

Start with cash receipts from customers
Subtract cash expenses for operating activities
Operating cash flow is the same whether you use the direct or indirect method

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Direct vs. indirect

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Operating cash flow is identical, just calculated differently. Non-operating cash flows are identical.

Operating cash flow is identical, but calculated differently

Non-operating cash flows are identical

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Direct vs. indirect

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Operating cash flow is identical, just calculated differently. Non-operating cash flows are identical.

Indirect method
Profit	50,000
Depreciation	10,000
Change in receivables	(10,000)
Change in inventory	5,000
Change in payables	5,000

Operating cash flow	60,000
Capital expenditures	(25,000)
Assets sold	5,000
Acquisitions	–
Investing cash flow	(20,000)
Debt borrowed	5,000
Debt principal payments	(20,000)
Dividends	(10,000)
Equity raised	–
Financing cash flow	(25,000)
Change in cash	15,000

Direct method
Cash receipts from customers	475,000
Cash paid for inventory	(202,000)
Cash paid to employees	(155,000)
Cash paid to suppliers	(37,000)
Interest paid	(9,000)
Taxes paid	(12,000)
Operating cash flow	60,000
Capital expenditures	(25,000)
Assets sold	5,000
Acquisitions	–
Investing cash flow	(20,000)
Debt borrowed	5,000
Debt principal payments	(20,000)
Dividends	(10,000)
Equity raised	–
Financing cash flow	(25,000)
Change in cash	15,000

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Indirect vs. direct

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Same operating cash flow. Two very different ways to get there.

Indirect method

What QuickBooks gives you

Starts with profit, then adjusts for timing
Reconciles profit to cash (helpful)
Hard to read and harder to use
Built for accountants

Direct method

Cash in minus cash out

Starts with customer receipts
Reads like your bank statement (intuitive)
Easy to forecast
Needs a second set of books (more effort)

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How do we use this information?

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The direct method

= bank balance accounting.

Every accountant has told you not to run your business from the bank balance. I'm giving you full permission, as long as you follow the rules.

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The rules

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1. It's a second set of books only

It never replaces your accounting system, your CPA, or your tax return.

2. It guides short-term cash planning

Use it alongside your monthly financial review, not instead of it.

3. It won't show profitability problems

Margins and overhead efficiency still come from your P&L and scorecard.

4. It won't show balance sheet problems

Working capital and debt levels still come from your balance sheet.

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Managing cash flow

The weekly cash tracker (from the bank account)
The 13-week cash forecast, and how to build yours

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A cadence for cash

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30 min / week

Weekly cash flow

Categorize the week's actual inflows and outflows from the bank. Your 'cash P&L'.

Updated weekly

13-week forecast

Built on top of the tracker. Predicts the next quarter, week by week.

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How it works

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01 Download

Download transactions from ALL business bank accounts: checking, savings, money market. (No credit cards!)

02 Categorize

Pick 10 to 15 categories (expand as you grow). Sort by description, then categorize. Like items group themselves.

03 Review

Monthly view to compare against your P&L. Weekly view to see near-term patterns.

04 Forecast

Roll it forward 13 weeks.

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Rules for categorizing

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Goal = mini “cash P&L”
Keep it simple
When in doubt, use a placeholder or combine with another category
Let the frequency of transactions guide you
Tag each category operating or non-operating

A STARTER LIST

Category	Type
Customer collections & refunds	Operating
Payroll and payroll taxes	Operating
Materials and suppliers	Operating
Rent and utilities	Operating
Credit card payment	Operating
Other overhead	Operating
Loan payments	Non-operating
Equipment purchases	Non-operating
Owner distributions	Non-operating
Taxes	Non-operating

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Sort & categorize

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Example bank download, sorted by description.

Date	Description	Amount	Category	Type
10/01	ACH ADP PAYROLL	(24,812)	Payroll	Operating
10/01	ACH ADP TAX	(6,104)	Payroll	Operating
10/02	AMEX EPAYMENT	(15,200)	Credit card payment	Operating
10/02	DEPOSIT MOBILE	11,450	Customer collections	Operating
10/03	FERGUSON SUPPLY	(8,930)	Materials and suppliers	Operating
10/05	FIRST BANK LOAN PMT	(6,000)	Loan payments	Non-operating
10/05	ONLINE XFER TO OWNER	(7,000)	Owner distributions	Non-operating
10/06	STRIPE TRANSFER	9,876	Customer collections	Operating

Illustrative transactions. Vendor and bank names are examples only.

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Monthly view: compare it to your P&L

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Sample monthly view of a cash flow tracker.

	Apr	May	Jun	Jul	Aug	Sep
Sales	$97,000	$206,000	$378,000	$251,000	$259,000	$269,000
Insurance	-	(1,000)	-	-	(1,000)	(1,000)
CC	-	(1,000)	(1,000)	(1,000)	(3,000)	(2,000)
Software	-	(3,000)	(7,000)	(4,000)	(3,000)	(3,000)
G&A	(6,000)	(5,000)	(2,000)	(8,000)	(10,000)	(7,000)
Payroll	(30,000)	(47,000)	(48,000)	(74,000)	(51,000)	(105,000)
Adjuster	(50,000)	(142,000)	(122,000)	(169,000)	(121,000)	(64,000)
Operating	11,000	7,000	197,000	(5,000)	70,000	88,000
True up	-	-	136,000	-	-	-
Other Income	-	-	-	-	-	-
Legal	(14,000)	(7,000)	-	-	-	-
Loan Payment	(44,000)	(41,000)	(40,000)	(41,000)	(40,000)	(40,000)
Non-operating	(58,000)	(48,000)	95,000	(40,000)	(40,000)	(40,000)
Grand Total	(48,000)	(41,000)	292,000	(46,000)	29,000	48,000

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Weekly view: patterns emerge

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A weekly tracker is a mini cash P&L. After a few months, the rhythm of your business shows up.

	8/10 - 8/16	8/17 - 8/23	8/24 - 8/30	8/31 - 9/6	9/7 - 9/13	9/14 - 9/20	9/21 - 9/27	9/28 - 10/2
Sales	$99,000	$50,000	$51,000	$99,000	$40,000	$33,000	$74,000	$41,000
Insurance	-	-	-	-	-	-	-	-
CC	-	-	-	-	-	-	(3,000)	(2,000)
Software	-	-	-	-	-	-	(3,000)	(3,000)
G&A	(4,000)	-	(2,000)	(2,000)	(3,000)	(1,000)	(2,000)	-
Adjuster	(39,000)	(2,000)	-	(38,000)	(1,000)	-	(30,000)	-
Payroll	-	(78,000)	-	-	-	-	(77,000)	-
Operating	56,000	(30,000)	49,000	59,000	36,000	32,000	(41,000)	36,000
Other Income	-	-	-	-	-	-	-	-
Loan Payment	(7,000)	(34,000)	-	-	-	(7,000)	(33,000)	-
Non-operating	(7,000)	(34,000)	-	-	-	(7,000)	(33,000)	-
Grand Total	49,000	(64,000)	49,000	59,000	36,000	25,000	(74,000)	36,000

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The daily cash report

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A snapshot of cash balance, inflows and outflows in your inbox every morning.

WHAT IT CONTAINS

Beginning balance (yesterday's ending)
Deposits (cash inflows)
Payments (cash outflows)
Ending balance
Anything large or unexpected, flagged

WHY IT WORKS

You are never caught off guard by a low balance, you stay on the lookout for large items, and you build good cash habits.

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The weekly cash tracker

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Built straight from the bank account every week. Group similar cash flows to see inflows, outflows and ending cash.

	Wk 1	Wk 2	Wk 3
A/R collections	31	24	29
Payroll, rent, vendors	(25)	(27)	(22)
Operating cash flow	6	(3)	7
Loan pmts · capex · distributions	–	(6)	(4)
Net cash flow	6	(9)	3
+ Beginning cash	52	58	49
= Ending cash	58	49	52

WHY IT MATTERS

Separates operating from non-operating cash: a clear view of the underlying business
Reveals your true weekly cash pattern (a cash P&L)
Fast, easy, simple
Becomes the input for the 13-week forecast

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The weekly cash tracker

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Four habits that turn bank data into a plan.

1

Tracking

Every week, track how much came in and how much went out

2

Categorize

Label where cash came from and went, using a few simple categories, and flag operating or non-operating

3

Patterns

After several weeks, patterns and recurring outflows appear

4

Planning

Then start planning 13 weeks into the future

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Why does this work?

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"This is extra work for me. Why should I bother?"

Fast

"Close" the books in 30 minutes

Easy

No accounting knowledge required

Simple

Work directly from the bank account. No books required.

RESULT This tool gives you a real-time view of cash flow in your business.

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How do you build a weekly cash tracker?

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Step-by-step instructions

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Seven steps from bank download to action plan.

01

Download transactions from all business bank accounts

02

Add to Excel and clean up the data

03

Sort by transaction description

04

Categorize into 10 to 15 groups

05

Label as operating or non-operating

06

Add to the template

07

Action plan

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Gather data

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Steps 1 and 2.

1

Get transactions from all accounts

Include ALL business accounts (checking, savings, money market), not just the main operating account
Export as CSV or Excel (look under Activity, Statements or Export)
Pull the same date range for every account
Initial build: grab the last 52 weeks so you start with history

TIP Use full calendar weeks, Monday to Sunday.

2

Add to Excel and clean up the data

Paste everything into one Transactions tab
Standardize columns: Date, Description, Net Amount
Delete transfers between your own accounts. They're not real inflows or outflows
Remove duplicates and pending items; keep only cleared transactions

TIP If it didn't clear the bank, it doesn't belong in the tracker.

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Download bank data

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Find your bank transactions every week, then export them to categorize.

Find your bank transactions every week

Download / export to categorize and add

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Simple categories

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Steps 3 and 4.

3

Sort by transaction description

Sort A→Z on the Description column
Like items group together (payroll, rent, credit card payments)
Recurring vendors and expenses reveal themselves quickly
Categorize whole blocks at once instead of row by row

TIP Sorting turns an hour of tagging into ten minutes.

4

Categorize into 10 to 15 groups

Keep it simple: this is not a chart of accounts
Our recommendation: Sales, Payroll, Rent & Utilities, G&A, Loan Payment, Credit Card, Marketing, Professional Fees
Label each as operating or non-operating (loans, capex, distributions)

TIP Don't overthink categories. You can always expand later.

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Export and sort

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Sort by description so similar transactions sit together.

Group similar descriptions for easy categorizing

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Categorize

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Pick 10 to 15 categories of inflows and outflows.

SUGGESTED CATEGORIES

Sales
Payroll
Rent and utilities
Credit cards
Loan payments
G&A / overhead

RULE Let your most frequent transactions dictate the categories.

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Group similar items

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Categorize whole blocks of matching transactions at once.

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Categorize and label operating vs. non-operating

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VIDEO PLACEHOLDER

Walkthrough: categorizing transactions and flagging operating vs. non-operating

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Summarize with a pivot table

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VIDEO PLACEHOLDER

Walkthrough: building the pivot table

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Weekly view of cash flow

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VIDEO PLACEHOLDER

Walkthrough: the weekly view of cash flow

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Analyze and plan

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Steps 5 and 6.

5

Add to the template

Paste your categorized data into the cash tracker template
Each column is one week (Monday to Sunday)
Check every week: beginning + cash in − cash out = ending
Verify: ending cash must tie to the actual bank balance. If it doesn't, something is missing or double-counted

TIP The template makes patterns easy to spot.

6

Action plan

Put 30 minutes on the calendar to update and review the tracker
Each week: download → clean → categorize → paste → reconcile
After 4+ weeks, recurring weekly patterns emerge
Then extend it forward into the 13-week forecast

TIP Consistency matters. Update and review it every week.

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Weekly cash tracker template

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Historic weekly cash flows on the left, 13-week forecast on the right.

Historic weekly cash flows

13-week cash forecast

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A finished weekly cash tracker

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Placeholder: replace with the final example tracker.

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What do you do with this tool?

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The 13-week forecast (13WCF)

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Purpose

Short-term cash planning

Anticipate all cash inflows & outflows over the next 13 weeks (3 months) to plan for potential shortfalls.

How it works

Built on top of weekly cash flow

Start with cash on hand
Add expected inflows
Subtract expected outflows
Calculate projected ending cash on hand

Why 13 weeks?

History repeats itself

One full quarter = far enough out to fix, short enough to be accurate
Your last few months are the best guide to your next 13 weeks.

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What it answers

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01

Can I make payroll next week? Next month?

02

Can I pay my next credit card bill in full?

03

Can I pay off this loan?

04

Can I take a distribution?

05

Can I sleep tonight knowing the business will make it?

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How to build your 13WCF

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01 Start

with your weekly tracker

02 Known items

Payroll dates, rent, loan payments, card due dates, insurance

03 Inflows

Average weekly inflows, apply growth rate to LY, use your A/R schedule

04 Other outflows

Planned equipment, distributions, taxes, bonuses

05 Beginning cash

Beginning cash + inflows - outflows = ending cash

What the forecast is & isn't

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It is

An estimate of where things are headed
A short-term planning tool
Actual cash movements (the truth)
Extra work: a second set of books

It isn't

An accurate predictor of the future
A set of financial statements
A full, detailed budget
Meant to be 100% accurate

Your goal: live inside this document until you're comfortably generating enough cash every week.

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How do you use this tool?

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Scenario #1

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What does the forecast tell you? Where is the problem?

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Scenario #2

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What changed? Look at the financing rows.

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Scenario #3

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Operating cash flow = $10,000. What does that mean for the plan?

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Strategy & tactics

Goals for managing cash
Tactics and levers

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"People calculate too much and think too little."

Charlie Munger

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The most common cash flow problems

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01

Not profitable

Operating below breakeven

02

Growing fast

Fueling growth with increased investments

03

Too much debt

Loan payments eating into cash flow

04

Taking too much out

Distributions bigger than cash flow supports

05

Timing

The #1 challenge in the short run

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Five levers to manage cash

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Every cash flow tactic pulls one of these.

01

Accelerate

Get paid faster

02

Increase

Get paid more

03

Eliminate

Pay less

04

Delay

Pay later

05

Unlock

One-time gain

Not every tactic permanently increases cash flow. Use the list as a cheat sheet when a situation calls for it.

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Liquidity: layers you can tap

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LAYER 1

Cash reserves

Find your minimum cash level and build to it. First line of defense and the cheapest.

LAYER 2

Backup financing

Line of credit, business credit cards. Open these before you need them.

LAYER 3

Emergency funds

Merchant advances, slow-paying vendors, owner injections. Expensive, last resort.

For startups and turnarounds, track cash runway: cash on hand / weekly net outflow.

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Tactics by area

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Revenue

Require deposits and progress billing
Invoice faster; call, don't just email
Small, regular price increases

Expenses

Hunt cost creep: cancel unused subscriptions
Renegotiate vendor price and terms
Freeze spending when the forecast says so

Working capital

Tighten terms; credit-check new customers
Order inventory closer to need
Batch bill pay to the 15th and 30th

Financing

Finance equipment instead of paying cash
Refinance or re-amortize expensive debt
Open a line of credit before you need it

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Revenue tactics

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Goal: get paid faster, and get paid more on each sale.

Invoicing and collections

Invoice more often; add early-pay incentives
Personalize collections: call, don't just email
Require deposits and signed contracts
Factor receivables when the need arises

Increase price

Regular, small price increases beat infrequent big ones
Dynamic pricing where the market allows

Increase volume

Upsells, cross-sells and pre-selling
Promotions, discounts and closeouts to pull demand forward
Sales commissions tied to collected cash

Other levers

Review the product catalog: cut or reduce slow movers
Credit-check new customers before extending terms
Add recurring revenue; offer customer financing (BNPL)

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Expense tactics

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Goal: reduce, eliminate or delay outflows.

STRUCTURAL

Expense cap / salary cap: solve for total expenses from a profit target
Team: raise productivity, outsource where it's cheaper
Downsize physical space to cut rent

HOUSEKEEPING

Hunt cost creep: cancel unused subscriptions
Review bank and credit card statements line by line
Freeze spending when the cash forecast requires it

VENDORS AND TIMING

Renegotiate price and terms, run RFPs, ask for discounts
Slow-pay: ask for an extension (or strategically don't ask)
Batch bill pay to the 15th and 30th
Take early-pay discounts when cash allows; use supply chain financing

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Working capital tactics

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Goal: less capital invested, and maximum conversion of profit to cash.

Receivables

Covered under revenue: invoicing, collections, deposits, terms.

Payables

Covered under expenses: vendor terms, slow-pay, batching.

Inventory

Catalog management, dynamic pricing, just-in-time ordering, dropship, consignment.

Prepaids

Move annual contracts to monthly or quarterly billing; cancel and take the pro-rata refund.

MEASURE IT

DSO

Days sales outstanding: how fast you collect

DPO

Days payables outstanding: how long you hold cash

DIH

Days inventory held: how long cash sits on shelves

CCC

Cash conversion cycle = DSO + DIH − DPO

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Financing tactics

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Goal: reduce risk and lower the monthly burden.

Manage debt

Consolidate and refinance high-cost debt
Re-amortize to lower the payment
Explore SBA programs

Assets

Sale-leaseback of property or equipment
Equipment financing instead of cash purchases

Equity

Outside investors
Partnerships and joint ventures

Divestitures

Sell non-core brands or product lines
Sell surplus property and equipment

RULE OF THUMB Cash Flow Index = loan balance ÷ monthly payment. Low index: pay it off or refinance it first.

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Cash management = 4 goals + 5 levers

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GOALS

Liquidity: plenty of cash in the bank
Growth: fund long-term goals
Convert: profit into cash, at a high rate
Unlock: one-time "spare cash" gains

LEVERS

Accelerate: get paid faster
Increase: get paid more
Eliminate: pay less
Delay: pay later
Unlock: one-time gain

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Key takeaways

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01

Profit isn't cash

Six drivers separate them. Growth is one of the biggest.

02

Use the direct method

Bank balance accounting, as long as you follow the rules.

03

Track weekly

30 minutes, straight from the bank.

04

Forecast 13 weeks

Feel the heat around the corner.

05

Pull the right lever

Accelerate, increase, eliminate, delay, unlock.

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info@profitmastery.net

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What's next?

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Questions

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