Cash Flow Is Oxygen: Five Metrics Every Owner Should Track Weekly

Profit is an opinion, but cash is a fact. Many businesses, despite appearing profitable on paper, fail because they simply run out of cash to cover essential expenses like payroll. A quick 15-minute weekly review of five key financial metrics can prevent most of these failures.

Essential Cash Flow Metrics

Here are five critical numbers every business owner should track weekly:

1. Cash on hand divided by average weekly expenses: This metric tells you your runway in weeks. It indicates how long your current cash reserves can cover your operational costs.
2. Days Sales Outstanding (DSO): This measures how long it takes your business to collect payments for invoices you've issued.
3. Days Payable Outstanding (DPO): This metric shows how long your business is taking to pay its vendors and suppliers.
4. 13-week rolling cash forecast: This is a projection of your expected cash inflows minus outflows for each of the next 13 weeks.
5. The gap between booked revenue and collected revenue: This highlights the difference between the sales you've made and the actual cash you've received.

Act on the Signals

Monitoring these metrics provides actionable insights for your business:

• When your runway drops below 12 weeks, it's a critical signal. All other business priorities should be paused until you've restored your cash runway.
• If your DSO creeps up by three days, it indicates that your customers might be silently using your business as a bank by delaying payments.
• The 13-week cash forecast is a powerful early warning system. If it shows a negative cash position eight weeks out, you have ample time to implement corrective measures - but only if you are consistently reviewing it.