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Hey entrepreneurs,

Last month, a $10M company went bankrupt. Their crime? Being profitable but no discipline.

Yes, you read that right. Even profitable companies can run out of cash.

That's exactly why retailers call it "Black Friday" – it's when they finally stop bleeding red and start seeing black on their books.

Think of it as having a bucket with holes: water keeps flowing in, but it's leaking faster than you can fill it.

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The real problem isn't losing money – it's when you're making money but can't seem to keep it.

I could be one of the usual suspects: inventory receivables, new equipment, or debt payments.

In this issue, I’ll share the top 8 cash-flow management tips every business owner should know.

But before that:

Because knowing the challenge is the first step to solving it. Most businesses track revenue, profits, and growth but miss- the cash conversion cycle, customer profitability, and more.

Here’s why that’s dangerous…

8 Critical Tips for Maintaining Cash Flows

1/ Make Sure Your Customers Are Worth The Cost!

We know that in business, customers should bring in more money than it costs to acquire them. 

Customer Lifetime Value (LTV): The expected margin a company gains from a customer over time.

Customer Acquisition Cost (CAC): The cost of acquiring a customer through marketing, sales, and other efforts.

Ideally, you would want a low CAC and a high LTV.

A strong LTV: CAC ratio ensures financial stability:

Bottom line: If you're paying more to get customers than they’re worth, you’re throwing money away immediately.

2/ Track The Cash Leaving Your Business

Do you know exactly where your money is going? Spending can spiral out of control in more ways than you realize. Petty cash, corporate cards, payroll, the list goes on. 

Solution? You need clear approval controls.

Make a clear list of who can approve each payment type. These checks and balances can help keep your spending organized and in control!

3/ Keep An Eye On Your Payment Cycles

Pending overdue invoices? Start by streamlining your accounts receivable process. Be tough about collecting receivables.

You can automate invoicing to reduce delays and offer multiple payment options to make it easier for customers.

So don’t wait around for customers to pay. A pile of unpaid invoices can choke your cash flow when bills come due.

4/ Improve Asset Management Before They Drain Your Cash

Poor asset management is like leaving money on the table. 

You need a real system that tracks the entire lifecycle of your assets. 

Knowing where they are, who’s using them, and their condition helps prevent costly mistakes like duplicate purchases, last-minute maintenance, and unexpected breakdowns.

5/ The Existing Customer Gold Mine

Most businesses obsess over new customers while ignoring their biggest asset; existing customers.  (Cost to acquire new customers >>>  Cost of selling to existing customers)

Example: A B2B software company spending $2,500 to acquire new customers but only $500 to upsell existing ones. How can they maximize profits?

• Develop a complementary products/services offering.

• Create a tiered loyalty program with clear benefits.

• The fastest way to improve cash flow? Sell more to the people already paying you.

6/ Have a Cash Crisis Plan Ready

Cash flow management isn’t about reacting, it’s about preparing.

Be ready for a 10% probability event (like an economic downturn) in the next 12-18 months.

✅ Maintain emergency cash reserves (3-6 months of operating expenses)

✅ Set up flexible credit lines before you need them.

✅ Build relationships with lenders early; don’t wait for a crisis.

The best founders don’t panic. They think like CFOs and prepare even before the storm hits. 

7/ Give Teams Less To Spend

The more cash a business has in the accounts, the more people will find ways to spend it. 

Instead of allowing your leadership teams to sit on large cash reserves, they can contribute a set amount to the corporate treasury each month.

This forces them to solve cash flow problems internally rather than relying on excess cash in their accounts.

It’s simple - if you have less, you spend less!

8/ Profit-to-Cash Conversion

Many profitable businesses fail due to poor profit-to-cash conversion.

Understanding the following metrics can help you track cash flow effectively:

• Monitor your profit-to-cash conversion ratio.

• Optimize working capital efficiency (inventory, receivables, and payables).

• Review cash conversion cycle monthly

Industry Benchmark: Apple has a negative cash conversion cycle, that’s something to aim for.

Cash flow isn't just about having money,  it's about understanding where it comes from and where it goes.

Think of it as your business's vital signs: revenue is the heartbeat, profit is the blood pressure, but cash flow? That's the oxygen keeping everything alive.

Remember: The best time to fix cash flow problems is before they happen.

As your personal CFO, I'm here to help you navigate these waters. Here are three ways to master cash flow:

1. Join the 3-day FREE webinar on 27-28 February and 3rd March 2025.

It would be 3-days of pure value. Here’s everything you need to know: Valuation Webinar

Here’s the link to register: Check it out!

Hope these tips were helpful and timely. See you next Wednesday! 

Matteo Turi, 
Your Personal CFO

P.S. Got questions? Hit reply,  I read and respond to every email.