Why is the bank account empty if the company is billing well?

It's the question many entrepreneurs ask themselves: "I bill €3 million, but at the end of the month there's no money to pay suppliers." The financial statements say the company is profitable. The bank account says otherwise.

Cash flow is the difference between the money entering and leaving the bank account. It's different from revenue (which measures sales) and profit (which measures income minus costs). A company can bill a lot, be profitable on paper, and still run out of cash.

What are the most common causes of negative cash flow?

1. The mismatch between collections and payments

This is the main cause. Clients often pay at 60, 90, or even 120 days. Suppliers typically want money at 30. Salaries are paid every month. The result is a permanent gap the company must finance with its own resources.

The article on managing 90-day payment terms explains in detail how to measure this gap using DSO and DPO and how to reduce it.

2. Eroding margins

If revenue grows but profit doesn't, cash is directly affected. Less margin means less liquidity generated from sales. The causes are three: worsened product/client mix, fixed costs that grew too much, prices not updated.

The contribution margin per product and per client is the tool for identifying where margin is lost — and therefore where cash is lost.

3. Unfunded growth

Paradoxically, growth can worsen cash flow. If revenue increases by 20%, receivables also increase proportionally. More sales means more capital tied up waiting to be collected.

A 20% growth with 90-day DSO on €3.5M revenue means roughly €170,000 more in receivables to finance. If this liquidity isn't available, growth becomes a trap.

4. Unplanned investments

A new machine, a new hire, a relocation: every investment absorbs cash. If it's not planned within the overall cash flow context, it can create a liquidity gap that takes months to close.

How to manage cash flow in an SME?

Cash flow management is based on three actions:

Measure: the 30-day forecast

The most useful figure is the projected 30-day cash balance: current balance + expected collections – scheduled payments. It's one of the 5 numbers to check every week.

You don't need cent-level precision. A reasonable estimate updated every Monday is more useful than an exact calculation done once a quarter.

Accelerate collections

Invoice immediately, not days after delivery
Offer early payment discounts (often cheaper than a credit line)
Follow up systematically (before the due date, not after)
Consider invoice factoring for clients with long payment terms
Factor the financial cost of late payments into client evaluations

Slow down outflows (where possible)

Negotiate better terms with key suppliers
Don't pay before the due date without a reason
Plan investments within the cash forecast context
Know the real cost of personnel to accurately forecast monthly outflows

What does a cash flow dashboard look like?

To manage liquidity on an ongoing basis, a few indicators are enough:

Indicator	Frequency	What it measures
Cash balance + 30 days	Weekly	Future liquidity
DSO	Monthly	Average collection time
DPO	Monthly	Average payment time
DSO – DPO gap	Monthly	Days to finance
Credit used / Credit available	Weekly	Safety margin

These numbers, combined with the average job margin and order backlog, form the complete dashboard for managing an SME.

What is the link between margins and cash?

Margins and cash flow are two sides of the same coin. A company with high margins and positive cash flow is healthy. A company with high margins but negative cash flow has a financial management problem. A company with low margins and negative cash flow is in danger.

Management control connects both dimensions: margins tell you whether the company creates value, cash flow tells you whether it manages to turn that value into available money.

Want to understand where your company's liquidity goes? Get in touch for a no-commitment conversation, or learn how our strategic consulting works.