Cash Flow Positive: Not a Rocket Science

A positive Cash Flow is not rocket science.

So, you just looked at your bank account, and it showed less money than you'd expected. A Positive Cash Flow is not rocket science: we gathered the TOP 3 most common reasons that lead to the negative cash flow. Take a closer look at these in minutes, and you will know how to turn your business positive cash flow again.

Step #1. Run 90-day cash forecast in seconds.

Look closer at your 90-day cash forecast at riskrate (picture below). You can see that your daily cash forecast goes down (on the left) because your cash out is higher than cash in (on the right).

Reason #1.

Cash-In is decreased due to lower sales.

First, let's take a look at the sales. Unexpected changes in the market can affect sales. The top line is the most important: you pay all expenses with sales invoices and incoming cash. For example, suddenly, due to lower sales, you're not bringing in revenue to cover your money out.

Look at your cumulative sales (picture below), for example, Q2 2023, and compare it to the earlier period Q1 2023, or the same period last year, Q2 2022, from the beginning of the year.

Take a look:

What does your cumulative sales look like?

Do you have business areas where your customers are churning?

Do you know why there are changes in your TOP 20 or TOP 50 customers?

What if your sales increase and decreases by 20%?

Sometimes, sales pricing can affect your profits. With riskrate, you can instantly get an overview of product pricing or TOP customers in seconds (picture below).

Take a look: What does your price development look like?

Have you increased prices on all relevant customers? Is ARPA in line with your plan?

Reason #2.

Cash-in is decreased due to late-paying customers.

The second most common reason for a negative cash flow can be that the money from sales is not flowing to your bank account due to late customer payments or long payment times. Customers, who don't pay on the due date, or have long payment times, are the number one reason for showing less money in your bank accounts than expected. The problem comes when you pay your bills but have yet to receive a payment from your customer: after this, your cash out is higher than cash in, so you're cash flow negative.

Look at your real-time open sales invoices at riskrate (picture below) to check your proportions proportion of overdue sales invoices (red) and not-due sales invoices (green). You can easily see if the outstanding unpaid payment is due to a single customer.

With riskrate customer risk profiles and weekly cash-in reports, you get full control of your customer's late payments. riskrate helps you before, during, and after you've sent your sales invoice.

Reason #3.

Cash-out is increased due to high spendings.

The third most common reason for a negative cash flow can be that you burn more than you earn. Let's take a look at how you spend your money. You can divide your costs into business-critical fixed costs and variable costs.

Typically, fixed costs arise from the long agreements you need to run your business. Examples of fixed costs are salaries, electricity, and rents, and these require negotiations to cut.

Variable costs depend on your sales. For example, raw materials, marketing, and traveling expenses could be more stable. Variable costs are easier to cut than fixed costs.

Riskrate can help your team with spending cut plans by telling you how you spend your money. You can easily filter and compare your spending and suppliers with any period and currency.

Look at your cumulative spending (picture below), for example, Q2 2023, and compare it to the earlier period Q1 2023, or the same period last year, Q2 2022, from the beginning of the year.

Take a look:

Are there areas where you're overspending? Is it due to price increases?

What if your sales increase and decreases by 20%?

What are the top less critical expenses you don't need to run your business?

Can you see a trend in credit card payments?

Have a chat with your key people and go through spending cut plans.

If you need to get your team on the same page faster, put riskrate to the test. With riskrate, anyone can run financial reports with a click.

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