Glossary

What is Cash Flow?

Q: What are common misconceptions about Cash Flow?

Common misconceptions include: Profitable companies don't have cash flow problems. Actually, fast-growing profitable companies can be cash-poor due to investment timing. Also, Revenue equals cash. Actually, revenue recognition and actual cash collection often differ significantly in timing..

The movement of money in and out of a business over time, determining whether the company has enough liquid funds to operate, invest, and grow.

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In Depth

Understanding the Details

Cash flow is the lifeblood of any business. Revenue and profitability matter, but a company that runs out of cash dies regardless of its P&L statement. For SaaS companies, cash flow dynamics are particularly interesting: monthly subscriptions provide predictable inflows, but growth requires upfront investment in sales and marketing before revenue arrives. Annual prepayment improves cash flow dramatically — collecting a year's revenue upfront while spending it gradually. Cash flow management involves understanding collection cycles, managing expenses relative to revenue, and planning for investment timing. The gap between when you spend (CAC) and when you earn back (payback period) creates cash flow needs that must be managed.

Examples

How It Works in Practice

Annual vs monthly billing

Shifting 40% of customers to annual prepayment improves cash position by £200K, funding growth without additional investment.

Cash flow forecasting

Monthly cash flow projection shows the company will be cash-negative in 4 months without either reducing spend or securing additional funding.

Collection improvement

Reducing average collection time from 45 to 30 days frees up significant working capital for growth investment.

Importance

Why It Matters

Cash flow determines operational survival. Companies with strong cash management can invest in growth opportunities and weather downturns that cash-poor competitors can't survive.

Misconceptions

What People Often Get Wrong

Profitable companies don't have cash flow problems. Actually, fast-growing profitable companies can be cash-poor due to investment timing.

Revenue equals cash. Actually, revenue recognition and actual cash collection often differ significantly in timing.

Cash flow management is just a finance concern. Actually, sales (deal terms), marketing (spend timing), and product (pricing model) all impact cash flow.

Our Approach

How We Handle Cash Flow

We help optimise cash flow through pricing and billing strategy, efficient acquisition spending, and growth planning that balances investment with sustainability.