Strategy & numbers

Cash is not profit, and the gap is where firms die

Profitable businesses run out of money regularly. It is almost always a timing problem, not an earnings one.

A business can be profitable on paper every month of the year and still fail. The accounts are not lying when that happens. They are answering a question about earning, while the thing that kills companies is a question about timing.

The squeeze, in one sentence

You pay your suppliers before your customers pay you. Everything else is detail. If your suppliers want thirty days and your customers take sixty, then every euro of growth widens a hole you have to fund yourself — which is why a good year can be the one that breaks you.

Three numbers worth knowing by heart

How long your customers actually take to pay, not what the terms say. How long you actually take to pay suppliers. And how long stock or work-in-progress sits before it converts. The difference between the first and the second, plus the third, is how many days of operating cost you are financing at any moment.

Most owners can quote their margin and cannot quote those three. They are more urgent.

Where the levers actually are

Chasing invoices earlier is the obvious one and the least pleasant. The quieter levers are better: deposits on large or bespoke orders, which shift the funding to the person who wants the thing; payment terms agreed at quote time rather than discovered at invoice time; and supplier terms renegotiated on the strength of consistent volume, which is a conversation most people never have because it feels awkward.

None of that changes your profit by a cent. All of it changes whether you can sleep in the month you grow twenty percent.