Growth consumes cash. Understanding the gap between profit and cash is one of the highest-value skills an SME owner can build.
Profit and cash are different things
A business can record a strong month on paper and still struggle to pay salaries, because the profit is sitting in unpaid invoices or in stock on the shelf. Growth usually makes this worse before it makes it better: you buy or deliver before you collect.
Four levers you control
Most cash-flow improvement in an SME comes from a short list.
- Collections: how quickly customers actually pay
- Payment terms: how quickly you pay suppliers
- Stock: how much cash is tied up in inventory
- Cost timing: which commitments are fixed and when
A simple rolling forecast
A thirteen-week rolling cash forecast is enough for most SMEs. It lists expected receipts and payments week by week, and it is updated every week. It will not be perfect, and it does not need to be. Its value is showing you a shortfall while you still have time to act.
Want this handled properly in your business?
SENK provides accounting, tax compliance, advisory and training support for Nigerian SMEs.