Cash is the lifeblood of every business. More businesses fail from running out of cash than from being unprofitable. Mastering cash flow management means you'll always know where your money is, where it's going, and whether you'll have enough.
CCC = Inventory Days + Receivable Days − Payable Days
Lower CCC = faster cash recovery. Negative CCC = you get paid before you pay.
Example: (₹4L ÷ ₹30L) × 365 = 49 days
How long stock sits before being sold
Example: (₹3.5L ÷ ₹50L) × 365 = 26 days
How long customers take to pay you
Example: (₹2.5L ÷ ₹30L) × 365 = 30 days
How long you take to pay suppliers
Send invoices the same day goods are delivered or services rendered. Every day of delay = one more day without cash.
Change from Net 60 to Net 30 or Net 14. Customers often pay on the due date — make it sooner.
Offer 2% discount for payment within 10 days (2/10 Net 30). Most customers will take it.
Send automated reminders at 7 days, 14 days, and 30 days overdue. Call after 30 days.
Extend payment terms with suppliers to Net 45 or Net 60. This increases your payable days.
Use just-in-time inventory. Dead stock ties up cash. Sell slow-moving items at a discount.
For large orders or projects, collect 30-50% upfront before starting work.
Leasing equipment spreads costs over time instead of large upfront capital expenditure.
Maintain 3-6 months of operating expenses as cash buffer for seasonal dips.
Project cash flow weekly for the next 13 weeks. Spot shortfalls before they become crises.
Cash flow management is about TIMING — when money comes in vs when it goes out. Profit doesn't guarantee survival
The Cash Conversion Cycle (CCC) is your key metric: Inventory Days + Receivable Days − Payable Days. Lower is better
Invoice immediately, shorten payment terms, and chase overdue payments — these three actions alone can transform your cash position
Build a 13-week rolling cash flow forecast to anticipate shortfalls and plan ahead
Maintain a cash reserve of 3-6 months of operating expenses for unexpected events