Cash flow · 4 min read · Published
Profitable but always short on cash: the four places the money goes
By Chris Greco, Founder and President.
If the P&L shows profit and the account does not, the money is in one of four places: receivables, inventory or work in progress, lumpy debt service, or a distribution and tax calendar nobody wrote down. Find which one and the forecast writes itself.
A $12M carrier shows $640k of profit for the year and a bank balance $200k lower than in January. Receivables grew $410k as two large shippers moved to 52 days. Two trucks went on notes with $190k down. Quarterly distributions and estimates took $240k. The profit is real. It is sitting in someone else's payables and in the yard.
Measure DSO by customer, not on average. Lay the debt schedule against the next thirteen weeks. Put owner draws and taxes on the forecast as a line. Then decide, in advance, what happens when the line dips below your comfort level.
Where this applies
Chris Greco
Founder and President, CFO Anywhere. CFO for owner-led companies since 2002. Executive MBA, Gies College of Business, University of Illinois.
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