Financial Intelligence
Profitable businesses go under because of cashflow problems, not because of profit problems. Projection is the tool that separates operators who survive from those who don't.
A business can show strong P&L profit while being cash negative. This happens when revenue is accrued (recognized before payment), when receivables are delayed 30–90 days, or when a large payable hits before the corresponding revenue lands.
Cashflow projection converts timing into visibility. It shows you exactly when cash gaps will occur — with enough lead time to act.
Opening cash balance
Actual bank balance today, not accounting balance
Monthly revenue
Expected cash received — not invoiced, not accrued
Monthly expenses
All cash outflows: payroll, rent, software, vendors
Outstanding receivables
Money owed to you that will land in Month 1
Upcoming payables
Known large payments due in Month 1 (tax, insurance, etc.)
You will not be able to make payroll or cover obligations. Need capital injection or revenue pull-forward within weeks.
Thin margin for error. One unexpected expense causes a gap. Accelerate collections, delay discretionary spend.
Revenue does not cover expenses. Cutting expenses or raising prices is required — this is not a timing issue.
Business is burning cash. Acceptable with growth investment context; dangerous without one.
Most operators should maintain a minimum cash reserve equal to 2 months of fixed expenses. This buffer absorbs revenue delays, unexpected costs, and slow collection months without triggering a crisis.
Minimum Reserve = Monthly Fixed Expenses × 2
Example: $38,000/mo expenses → $76,000 minimum cash reserve
Operating below this level = operating in crisis mode, permanently.
When your projection shows a gap, you have four levers, in order of speed:
1. Accelerate receivables
Call customers, offer early pay discounts (1–2%), escalate overdue accounts
2. Delay payables
Negotiate extended terms with vendors, defer non-critical spend
3. Inject capital
Owner contribution, business line of credit, revenue-based financing
4. Cut expenses
Pause subscriptions, reduce contractor hours, defer equipment purchases