Revenue is vanity, profit is sanity, cash is reality. Here's how India's growth-stage businesses should be managing cash flow.
The graveyard of Indian MSMEs is full of profitable businesses that ran out of cash. Revenue was growing. Margins were acceptable. The founder was optimistic about the future. But the cash timing — the gap between paying suppliers and collecting from customers — was slowly strangling the business.
The Cash Flow Paradox
Fast-growing businesses often have worse cash flow than slow-growing ones. When you're growing, you need to buy raw materials, hire employees, and build inventory before you can invoice customers — and before customers pay. The faster you grow, the more cash you need to fund this gap. Founders who don't understand this paradox sometimes celebrate revenue growth that is actually destroying their cash position.
The Three Levers
Receivables management. The most immediate lever for most Indian businesses is tightening collections. How long are customers taking to pay? What's your average debtor days? Is there a systematic follow-up process for overdue invoices, or does collection depend on the founder's personal relationships? A focused receivables management process can free significant cash in 90 days.
Payables optimisation. Not all payables are equal. Paying strategic suppliers early (and getting better terms) may make more sense than holding cash back from them. Extending payment terms with less critical suppliers can improve your cash position. This requires a deliberate payables strategy rather than paying invoices based on whoever is pushing hardest.
Working capital efficiency. Inventory management, contract terms, advance payment structures — all of these affect the amount of cash tied up in the business at any given time. A systematic review of your working capital cycle often reveals significant opportunities for improvement.
The 13-Week Cash Flow Forecast
Every ₹10Cr+ business should have a 13-week cash flow forecast that is reviewed weekly. This is not a complicated spreadsheet — it's a practical tool for knowing what cash is coming in, what's going out, and what gaps you need to manage. Most founders who don't have this are running their business blind.
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