Revenue Is Growing, Profit Is Growing. So Why Is Cash Falling?
REVENUE IS GROWING. PROFIT IS GROWING. SO WHY IS CASH FALLING?
This is one of the most important questions FP&A should help management answer. A business can report:
- Revenue ↑ 18%
- EBITDA ↑ 12%
- Net Profit ↑ 10%
...and still have less cash in the bank. Why? Because PROFIT DOES NOT EQUAL CASH. Look underneath the P&L:
1. Receivables increased
Sales are growing, but customers are taking longer to pay. Growth is consuming cash.
2. Inventory increased
Cash is tied up in excess or slow-moving stock.
3. Payables decreased
Suppliers are being paid faster while customers pay slower. The company is financing its customers.
4. CAPEX increased
New assets, systems, branches, or projects can absorb cash before generating returns.
This is where FP&A creates real value. A basic report says: Profit increased 10%.
A strong FP&A analysis asks: WHERE DID THE CASH GO?
Profit tells you whether the business is earning. Cash tells you whether the business is funding itself. FP&A connects the two.
Because growth is only valuable when it creates SUSTAINABLE CASH.
Turning these ideas into a disciplined monthly practice is core to the work of a fractional CFO. To see where your company stands today, start with the instant financial diagnosis, free during our founding period.
Read next
- When Cash Is Tight: The Right Order of Cash Levers Before Cutting Costs
- The Cheapest Financing Is Already on Your Balance Sheet: Release Working Capital Before Going to the Bank
- Why the Most Profitable Month Comes Closest to Missing Payroll: What Growth Does to Cash
- Profitable on Paper, Three Weeks from a Cash Problem: The 13-Week Cash Flow Forecast
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