Many SMEs look profitable on paper yet feel broke in practice. That's not mismanagement — it's a working-capital problem and a lack of forward visibility.
Cash-Poor: What It Looks Like
- Debtors drift to 45–60 days while suppliers expect 7–14.
- Inventory absorbs cash faster than it converts to sales.
- Payroll spikes and BAS land on the same week as slow receipts.
- CapEx or bulk buys happen without a cash runway view.
- Leadership debates profit, but no one can answer: “What will our cash be in six weeks?”
Cash-Confident: The Opposite State
- You run a rolling 13-week cash forecast updated weekly.
- Receivables are managed by calls and cadence, not hope.
- Payment runs align with receipts; critical suppliers are protected.
- Stock is right-sized to sales velocity with clear min/max rules.
- Decisions consider timing effects, not just P&L outcomes.
Your Cash Rhythm: The 13-Week View
- Forecast: Map weekly inflows and outflows for 13 weeks — receipts, wages, super, BAS, rent, loans, suppliers.
- Update: Refresh every week; lock the past, roll the horizon forward.
- Flag: Highlight weeks trending negative; capture actions beside each dip.
- Act: Pull working-capital levers now, not when cash is already short.
Working-Capital Levers That Move the Needle
- Receivables (DSO): Call, don't just email. Offer small early-payment incentives. Enforce deposits for made-to-order.
- Payables (DPO): Negotiate timing, not price, with non-critical suppliers. Protect those who protect your delivery.
- Inventory (DIO): Cut slow movers; tighten re-order points; align buys to true demand curves.
- Terms & Policies: Standardise credit checks, deposits, stage payments, and floor prices to prevent leakage.
- Pricing & Margin: Fix discount creep and freight leakage that silently erode cash.
Numbers That Keep You Honest
- Cash Conversion Cycle: CCC = DIO + DSO – DPO.
- Operating Cash Coverage: OCF / (Wages + Fixed Outgoings).
- Runway: Weeks until cash hits zero at current burn.
Quick Wins This Month
- Start a 13-week cash sheet; schedule a 20-minute weekly cash huddle.
- Phone your top 10 debtors; set up direct debit for repeat customers.
- Stagger supplier payments to match receipt patterns; consolidate low-value orders to cut freight.
- Freeze non-critical CapEx until runway is ≥ 8 weeks.
Rule of thumb: Profit is lagging; cash is live. Manage the live number first.
Warning Signs You're Sliding Toward Cash-Poor
- “We're profitable, but always tight.” — Timing gaps, not revenue.
- “Bills arrive before customers pay.” — Misaligned terms, no buffer.
- “I never know our cash in six weeks.” — No forecast or cadence.
- “Growth feels risky.” — Working capital can't support the plan.
From Insight to Plan
Run a 60-minute workshop: list the top three cash dips in your 13-week view, pick one lever per dip, assign an owner, and commit to a date. Review progress in next week's cash huddle. That rhythm compounds into confidence.
Want the full story and examples? Read the complete article. Related read: Why Cash Flow, Not Profit, Decides Survival.