- Funding, working capital and forecasting are the three pillars of operating finance.
- The cash conversion cycle explains most cash surprises in growing companies.
- Profit and cash are different numbers and can move in opposite directions.
- Forecasts are useful because of the assumptions they expose, not their accuracy.
- Unit economics tell you whether growth improves or worsens the position.
What business finance covers
In an operating company, business finance answers four recurring questions: where does money come from, where is it tied up, when will it arrive and leave, and what does the pattern tell us about the business.
Everything else — the card programme, the payables workflow, the accounting integration — exists to make those four questions answerable quickly and accurately.
Funding options and what they cost
Cost is not only the interest rate. Dilution, covenants and control matter as much.
| Source | Typical cost | Main trade-off |
|---|---|---|
| Retained earnings | No financial cost | Slowest; constrains growth rate |
| Equity investment | Dilution | No repayment obligation, but permanent ownership change |
| Bank debt | Interest plus covenants | Cheapest for profitable companies; hardest to obtain early |
| Venture debt | Interest plus warrants | Extends runway, usually requires prior equity backing |
| Revenue-based financing | Fixed multiple of revenue | Fast and flexible, expensive at scale |
| Supplier terms | Implicit or discount forgone | Free working capital; strains vendor relationships if abused |
Working capital and the cash conversion cycle
Working capital is the money tied up in running the business: what customers owe you, what you hold in stock, minus what you owe suppliers. The cash conversion cycle measures how long that money is unavailable.
It is the single most useful diagnostic for a growing company, because growth consumes working capital. A profitable business can run out of cash simply by growing faster than its collection cycle allows.
- Collect faster — invoice promptly, chase systematically, make paying easy.
- Hold less — inventory and prepayments are cash sitting still.
- Pay on terms rather than early, without paying late.
- Measure the cycle monthly; it moves before the bank balance does.
Profit is not cash
Accrual accounting recognises revenue when it is earned and costs when they are incurred, which is the right basis for measuring performance. It is the wrong basis for knowing whether payroll will clear.
Every finance function needs both views: the profit and loss statement for performance, and a cash forecast for solvency. Companies that watch only one of them get surprised by the other.
Forecasting that earns its keep
A forecast's value lies in the assumptions it forces you to write down. When reality diverges, the useful question is which assumption was wrong — and that is only answerable if the assumptions were explicit.
- Separate committed costs from discretionary ones; they behave differently under stress.
- Model at least a base case and a downside; a single case is a wish.
- Refresh monthly against actuals and record what changed.
- Keep the model simple enough that someone else could use it.
Unit economics
Unit economics ask whether one more customer makes the company better or worse off. Until that answer is positive and reliable, growth amplifies whatever is already true.
The mechanics differ by business model, but the principle is constant: understand the contribution of a unit after the costs genuinely attributable to it, then decide how much you are willing to spend to acquire it.
Frequently asked questions
Profit measures performance under accrual accounting; cash flow measures money actually moving. A company can be profitable and insolvent, or loss-making with healthy cash, depending on timing and working capital.
Most operating companies run a rolling thirteen-week forecast for operational decisions and a twelve-month view for planning. The short forecast is where solvency problems become visible in time to act.
It should not be relied on as one. Corporate programmes commonly settle in full each cycle, and limits linked to cash can be reduced. Treat financing decisions separately from card selection.
At minimum: profit and loss against budget, a cash position with a short forecast, working capital movement, and a short commentary on what changed. Consistency between months matters more than volume.
Keep reading
Sources and further reading
Every factual statement on this page is checked against primary documentation. Terms change frequently, so confirm details with the provider before acting on them.
- FASB Accounting Standards Codification Reference point for accrual, expense recognition and close-process statements.
- FDIC — deposit insurance and pass-through coverage Reference for how deposit insurance applies, including through third-party arrangements.
- Nacha — ACH Network rules and resources Used for statements about ACH timing and payment rails.
- Brex — official website Primary source for current product names, availability and terms.