How profit, cash flow, working capital, forecasting and decision making can move in different directions.
Why this matters
A business can be profitable on paper and still unable to pay suppliers, staff or HMRC. Understanding where cash gets trapped is one of the most important responsibilities of finance leadership.
Where cash gets trapped
- Debtors stretching while terms remain unchanged
- Stock levels building up faster than sales
- Capital expenditure funded from operating cash
- Tax liabilities accruing without being set aside
- Growth funded entirely from working capital
Common issues or warning signs
- Bank balance falling despite reported profit growth
- Frequent reliance on overdraft, factoring or director loans
- Late payment of HMRC liabilities
- Forecasts that have not been updated for current trading
Practical steps
- Produce a rolling 13 week cash flow forecast
- Track debtor days, creditor days and stock days monthly
- Reserve tax and statutory payments in a separate account
- Tie growth and capital decisions to cash impact, not just profit
How Bracknwell Partners can help
Our fractional finance and CFO advisory teams help businesses build cash discipline alongside profit growth, so management decisions are made with the full picture.