The Finance Gem 💎 #99: The 3 Cash Flow Drivers Every Business Must Master

Hi there,

Do you know exactly what to do to improve your company's cash flow?

This is what I’ll be covering in this week’s issue of The Finance Gem 💎

But first, a quick reminder about my free Live EBITDA Masterclass on Friday.

We opened up 1,000 spots for this event and half are already taken.

Secure your seat today so you don’t miss out and make sure to join live for exclusive bonuses.

Register here: 5 Deadly EBITDA Mistakes (and How to Fix Them)

Most executives treat EBITDA like their north star metric. But often times it blinds them to what's really happening with their cash, profitability and value created. 

In 60 minutes, I'll show you:

• The 5 most dangerous EBITDA mistakes and their real-world consequences

• Why investors, lenders, and management teams are all in love EBITDA

• What top CEOs actually track to drive value, liquidity, and performance

Now, let's get into today's topic.

3 cash flow levers every business must master

Cash flow doesn't just flow. It's engineered by design.

But so many leaders don't control the drivers, so they're at the mercy of their operations. They watch revenue grow while cash disappears. They celebrate new contracts while struggling to make payroll. They push for more sales while competitors with lower revenue have more cash to invest.

You end up growing on paper but struggling in reality, watching competitors with lower sales beat you to opportunities simply because they have more cash available.

Today, I'm going to show you the only 3 levers that actually drive cash flow in your business and exactly how to use each one to free up trapped cash.

Let me break down each one:

Lever 1: Revenue growth is important, but it's not just about closing more deals

Most business leaders think more sales equals more cash, but that's only half true.

The formula for cash flow starts with sales revenue, yes, but here's what matters: growing the right kind of sales matters more than growing any sales. 

The quality of your revenue shows whether growth creates cash or eats it up. So, consider these two strategies that actually improve cash flow:

Speed over size: Instead of chasing huge deals that take 9 months to close, focus on deals that close in 30-45 days. A $100K deal that closes next month puts more cash in your bank than a $500K deal that takes a year.

Reward fast payment: Offer 5% discounts for payment when contracts are signed or 2% off for payment within 10 days. You'd be surprised how many finance teams will take this deal, instantly improving your cash collection.

A mistake I often see leaders make is celebrating yearly contract values while their average collection time gets longer and longer. That "growth" is actually hurting your cash flow. Focus instead on collection speed, so how fast you turn a signed contract into money in the bank. 

This single change can add 20-30 days of cash back into your business.

Lever 2: Operating margins create pure cash flow (if you do it right)

Here's where most companies leave money on the table: they treat operating margins as just a percentage instead of a cash multiplier.

Operating margin measures how much profit you keep from each dollar of sales after paying for your products and running your business (but before interest and taxes).

This directly turns into cash flow through a simple relationship: every 1% improvement in operating margin on $50M in sales equals $500K in additional cash per year.

But the key is where you find that margin improvement.

From my experience, these are the highest-impact areas for most businesses:

Supplier consolidation: Most companies use 50% more suppliers than they need. Combining orders with fewer strategic partners can reduce costs by 3-5% through volume discounts and less administrative work.

Automation over layoffs: Automate processes instead of cutting heads. Every manual process in finance, HR, or operations that takes 10+ hours per week is a cash leak. Automation typically pays for itself in 4-6 months.

Shipping and delivery savings: Companies often pay premium prices without premium volume. Renegotiating shipping contracts or using delivery aggregators can save 15-20% on these costs.

Just do the math: a 6% profit margin improvement on $50M in sales generates $3M in additional cash per year. That's enough to fund significant growth without borrowing any money.

Lever 3: Cash efficiency is your hidden multiplier

Quite honestly, this is the lever that I think separates good leaders from great ones.

Capital efficiency means getting more cash flow from every dollar you spend rather than simply spending less. And in most businesses, your biggest opportunity lies in managing your short-term cash flows cycle rather than long-term asset efficiency.

Here's what traps cash in most businesses: waiting for customer payments, holding inventory (if you sell products), and the timing of when you pay suppliers.

Here's how to improve each component:

Inventory speed: Use 13-week rolling forecasts instead of ordering once per quarter. This alone can reduce inventory sitting time by 15-20 days.

Faster collections: Bill your largest customers twice a month instead of monthly. Offer automatic payment incentives. Target: collect within 40 days.

Smart payment timing: Negotiate 45-60 day payment terms with suppliers in exchange for guaranteed volume. Never pay early unless you're getting a discount that beats your borrowing costs.

Reducing your cash cycle from 80 days to 30 days frees up 50 days of cash flow. For a company with $50M in sales, that's approximately $6.8M in cash that becomes available for growth.

Just think about it! The money you need for acquisitions or extensions might be hiding in your own balance sheet.

Here's your 90-day action plan:

Week 1-2: Calculate your current cash flow using the complete formula. Identify which of the three levers has the biggest gap compared to your industry averages, trends and targets.

Week 3-4: Pick ONE lever to improve first. If cash is critically tight, start with short term cash efficiency (that will have the fastest impact). If you have breathing room, focus on operating margins (highest long-term value).

Week 5-12: Implement 2-3 specific initiatives on your chosen lever. Track weekly progress on your key numbers: collection speed, operating margin percentage, and cash cycle days.

The set this intelligent monitoring system on autopilot and move on to improve the next lever. Reach out to our team at Financiario if you need help implementing this in just 7 days.

The leaders who master these three levers have more cash available when they need it. While your competitors are asking banks for loans, you'll have your own cash ready to invest in growth opportunities.

That's the real power of financial intelligence and understanding cash flow: turning your sales into available cash quickly is more valuable than just having high sales numbers.

These cash flow levers are exactly the kind of financial insights we dive deep into inside the CEO Financial Intelligence Program.

If reading today’s newsletter got you thinking differently about your cash, imagine having 6 weeks to completely rewire how you approach every financial decision in your business.

In 6 weeks together and only 9 core hours, you'll learn how to:

• Use financial data to make better strategic decisions (instead of just going with your gut)

• Connect profit margins and cash flow to actual business performance

• Handle capital allocation strategically (a CEOs biggest job)

• Lead board meetings with real financial insight

Greta Goto, Board Vice Chair, recently completed the program and said this:

And until July 15th, you can join with the Early Bird offer, saving you $500. The price will increase after July 15, and program seats are limited, so be sure to secure your spot early.

If you have any questions, please reply and let me know. 

I hope to see many of you at Friday’s EBITDA masterclass,

Oana

P.S. Be sure to check your inbox next week. I'm preparing something special to celebrate the 100th issue of The Finance Gem 💛