Most companies don’t go under because they weren’t profitable. They go under because they ran out of cash.
You can have strong margins. You can be hitting your revenue targets. But if you’re collecting slowly, spending unevenly, or growing too fast without planning for it—you can still find yourself short.
GrowthLab Financial says 82% of small businesses face cash flow challenges. Most teams focus on revenue and margins. But real stability comes from tracking the right cash metrics. ThoughtSpot calls operating cash flow a key sign of liquidity. Want to fund future moves? Watch your cash flow.
That’s why cash flow metrics matter. They show when money lands, where it gets stuck, and how it moves through your business. This clarity helps you decide when to hire, what to invest in, and how to plan your next step.
Why cash flow metrics matter more than ever
Cash is the constraint everything runs on. It determines when you can hire, how fast you can grow, and how much room you have to absorb a surprise.
But most companies don’t track cash in a way that reflects this. They look at profit and loss, review burn rate, maybe reconcile the bank statement at month’s end.
Cash flow metrics work like your financial radar. When you track these numbers, you always know where you stand. Think of these metrics as your go-to tools for smarter decisions. If you know how long it takes to collect payments or how much cash you’re bringing in each month, you can:
- Speed up collections, if needed
- Time payments wisely
- Set the right working capital targets
Teams that track cash flow metrics make stronger strategic calls. They prep for ups and downs, model scenarios, and always keep enough liquidity for growth.
Good teams don’t wait for a crisis. They watch cash early, and often.
The cash flow metrics that matter
Cash flow has a few core parts. Each tells a different piece of your financial story.
- Operating Cash Flow (OCF) tracks cash from day-to-day operations. Wikipedia sums it up: it’s cash from revenue minus regular operating costs. Oracle gives a formula:
Operating income + depreciation – taxes + changes in working capital. If OCF is strong, your business really brings in cash. - Free Cash Flow (FCF) shows what’s left after capital expenses. Wikipedia defines it as the cash above what you need for daily business and fixed assets. Investopedia calls it “cash left for growth after you cover the basics.”
- Net Cash Flow looks at all your cash in and out for a set period. It includes operations, investments, and financing activity. Investopedia says it captures the full change in your cash position, plain and simple.
- Cash Conversion Cycle (CCC) times how long it takes to turn inventory into cash from sales. Wall Street Prep describes CCC as “the days it takes to turn your inventory into cash after a sale.” Add up Days Inventory Outstanding, Days Sales Outstanding, and Days Payables Outstanding to get it. The shorter your cycle, the better your liquidity.
Together, these numbers give you the full picture. OCF shows efficiency, FCF tells you how flexible you are with spending, and CCC shows how well you manage working capital.
Common pitfalls to avoid
Watch out for these cash-flow traps. Here’s what to look for, and what to do instead:
- Skipping a cash-flow plan: Not forecasting inflows and outflows leads to shortfalls. GrowthLab Financial says this is the most common slip.
- Confusing profit and cash flow: Profit’s what’s left after expenses. Cash flow measures the real money coming and going. You can show a profit but still run short if payments are slow or you hold too much inventory.
- Manual, outdated forecasting: Relying on old spreadsheets adds errors. Most inaccuracies come from human error and manual data.
- Ignoring the link between sales and cash: More sales mean bigger receivables and higher inventory. That can squeeze your cash.
How to make cash flow metrics actionable
Cash flow metrics matter most when you use them in your big-picture planning. The goal: get everyone aligned on cash management, not just finance.
Start simple. Set KPIs for core cash flow numbers, like:
- Operating cash flow: the baseline.
- Cash conversion cycle: the lever.
Track these regularly. They’ll show how you’re doing on liquidity and spotlight what needs work.
Connect your cash flow tracking to forecasting and expenses. When you plan for growth, estimate the cash impact too. Fast growth? You’ll need more working capital. Lower costs? That frees up more cash.
Runway’s collaborative forecasting lets teams forecast together—real time. You can model profit and cash flow in a single view. It’s a clear, actionable way to see the impact of decisions from every angle.
Use cash flow metrics to guide hiring and expansion. Before growing your team or opening a new office, model the cash you’ll need and the upside you’ll gain.
Best practices for cash flow monitoring
- Check early and often: ThePanax suggests reviewing cash flow weekly or monthly. But don’t wait for issues. Most finance teams check flows and payment status daily for fast decisions (Paystand). Quick reviews let you respond right away.
- Use dashboards, not tabs: One place to see cash inflow/outflow, OCF, CCC, and FCF.
- Focus on action metrics. Skip vanity numbers. Add A/R and A/P turnover rates to your dashboard. These numbers show how quickly you turn sales into cash and manage payables (Oracle).
- Keep everyone aligned: Cash flow isn’t just finance. Partner up. Sales teams should know how terms impact timing. Marketing gets why promos matter. Ops sees the effect of inventory on working capital. They should all see the same view.
- Model the future: Cash flow metrics aren’t just for reporting—they’re for forecasting. So, sync real-time finance data from every system, and always keep your forecasts current. Give everyone current info for better decisions.
FAQ: Top 5 questions on tracking cash flow
1. How often should we review our cash flow?
Review as often as your business needs. Daily works for most, especially if your cash flow shifts quickly. Weekly tracking helps spot trends and tweak your plan. Adjust as your business changes.
Real-time forecasting keeps you ahead without extra effort.
2. Which metrics are most critical for business sustainability?
Start with operating cash flow. It reveals if daily business generates real money. Low operating cash flow is a warning flag you’re collecting slowly or burning too much.
Next, watch your cash conversion cycle. A shorter cycle means faster cash in hand and less outside financing.
Free cash flow rounds out the essentials. It’s your “spend on what matters” fund after the basics.
3. How can we avoid overlooking future liabilities?
Model different scenarios. Test expense changes, growth speed, and outside risks. This helps spot cash gaps before they hit.
What-if scenarios let you plan for anything. Build both best and worst case. Track the impact. Decide with confidence.
Keep an eye on payment timing. Big contracts, seasonal costs, or equipment upgrades affect cash outflows. Model the timing as you go.
4. What's the difference between profit and cash flow?
Profit is revenue minus expenses—on paper. Cash flow is the real story: when money enters and leaves your accounts.
Timing is key. Sales today might mean payment next month. Expenses can show up before or after cash leaves.
Profit gives a snapshot. Cash flow shows what you can spend, invest, or save now.
5. Can a modern finance platform really improve cash flow management?
Absolutely. A unified platform automates data pulls and dashboards. You get real-time insights, not manual juggling.
Automation means fewer mistakes and quick answers. Your team can skip the grunt work and focus on strategic calls.
Flexible models let you test ideas, see the cash impact, and pivot fast. Test assumptions instantly and track results—it’s modern, not manual. With real-time collaboration, everyone has the same info. Decision-making speeds up. Alignment becomes easy.
What happens when you track the right cash flow metrics
You move faster.
You plan smarter.
You make decisions with your eyes open.
Cash flow metrics are your foundation for sharper decisions. Use them to see where you stand, spot wins or issues, and lead with confidence.
Track the right numbers, avoid the classic traps, and make cash flow analysis part of your regular planning. These metrics are the signal that shows if your strategy is sustainable, or just looks good on paper.
Modern finance tools do the heavy lifting and make your insights stronger than any spreadsheet ever could.
Book a demo to see how Runway helps teams forecast together, model cash flow in real time, and plan with confidence.