M-Institute (ANZ)
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Cash Flow

Is the most common reason for keeping owners awake at night.

Cash Flow

One major impediment for Medium Sized Businesses (MSBs) is cash flow. Research by the M-Institute identified cash flow - or the lack of it - to be one of the most misunderstood areas. 

"Misunderstood" is not a lack of appreciation of the immediate cash flow issues of the business, it is a lack of understanding of the drivers and dynamics of cash flow.

Cash flow can often be put under enormous strain by growth. In fact, rapid growth can cause cash flow problems. 

For example, the healthy incremental sale of products or services with a fifty percent gross margin can create a cash crisis. If the products or services need to be paid for in a cycle that is less than half of the collection, or sales cycle, then cash flow will be negative until the customer pays.

Add to this the complexity of multiple supplier inputs, expense cycles, accruing liabilities, movements in fixed costs AND the accurate forecasting of immediate and future cash flow requirements of the business can become extremely difficult.

This lack of visibility is the most common cause of anxiety for business owners, followed closely by people related issues. 


No successful entrepreneur has ever created a highly successful business on their own. As Ernesto Sirolli identified:

"No one person can make it, sell it, and account it. Every successful business requires at least three core disciplines to succeed and as most entrepreneurs are good at making it, or selling it,  it is no surprise that accounting for it, is not a strength."

At some point a MSB must take its financial reporting to the next level. That means developing in house capability around the dynamics of the three-way cash flow matrix that affects cash flow - accounting for, reporting and forecasting profitability, working capital and balance sheet variations. 

Research undertaken by the M-Institute has identified that inefficient businesses, have on average, 12% of their cash flow tied up in working capital and unproductive assets and expenses.

Check out our resources page full of content to assist with Cash Flow