Revenue is not cash. This is the single most important lesson in business finance, and yet it catches growing businesses off guard every single quarter. Here are five cash flow mistakes we see repeatedly — and how to prevent each one.
1. Confusing Profit with Cash
Your P&L says you made ₹20 lakh profit last quarter. But your bank balance dropped by ₹8 lakh. How? Because profit is an accounting concept. Cash is what's in your bank.
The gap comes from timing differences: you've invoiced clients but they haven't paid yet (receivables), you've bought inventory that hasn't sold (working capital), or you've made advance payments for annual contracts. A profitable business can absolutely run out of cash.
The fix: Look at your cash flow statement, not just your P&L. If you don't have a monthly cash flow statement, that's problem number one.
2. Ignoring Receivables Ageing
You've invoiced ₹50 lakh. Great. But how much of that is overdue? In India, payment cycles are notoriously long — 60, 90, even 120 days is common in B2B. If you're not tracking your receivables ageing weekly, you're leaving cash on the table.
We've seen businesses with ₹1 crore+ in receivables where 40% was overdue by 90+ days. That's not revenue — that's a collection problem disguised as growth.
Healthy Receivables Ageing Benchmarks
The fix: Implement weekly receivables review. Send payment reminders at 7 days overdue, escalate at 30 days, and have a clear policy for 60+ days. Consider offering 2% early payment discounts for large invoices.
3. Scaling Costs Before Revenue
You just signed a big client, so you hire five people in anticipation. But the client's first payment won't hit your account for 60 days, and those five salaries start immediately. This is how growth kills cash flow.
The same applies to office upgrades, software subscriptions, and marketing spend. Fixed costs climb steadily while revenue grows in lumps.
The fix: Maintain a 13-week rolling cash flow forecast. Before any new expense commitment, model its impact on your cash position for the next quarter. If the forecast shows a negative cash balance at any point, delay the expense or arrange working capital finance first.
4. No Cash Reserve for Tax Payments
Advance tax deadlines (June 15, September 15, December 15, March 15) catch businesses off guard every year. GST payments are monthly. TDS deposits are monthly. If you're not setting aside 25-35% of profit for taxes, you'll face a cash crunch every quarter.
We've seen businesses take on expensive short-term loans just to pay advance tax — effectively paying interest on money they should have set aside months earlier.
The fix: Open a separate bank account for taxes. Transfer 30% of monthly profit into it automatically. When tax dues come, the cash is already there.
5. Not Having a Working Capital Line
Even well-managed businesses have cash flow timing gaps. The difference between a crisis and a minor inconvenience is having a working capital facility in place before you need it. Banks are happy to lend when your books are clean and you don't urgently need the money. They're much less generous when you're desperate.
The fix: Set up an overdraft or working capital line when business is good. You don't have to use it — but having it available gives you a buffer for timing gaps. Typical cost is 12-16% per annum on the drawn amount, which is far cheaper than the cost of missing payroll or defaulting on a vendor payment.
The Bottom Line
Cash flow management isn't glamorous, but it's the difference between businesses that survive and businesses that thrive. Every one of these mistakes is preventable with the right processes and the right financial visibility.
The common thread? You need accurate, timely financial data — not quarterly reports that arrive 45 days late. Monthly MIS, weekly cash flow tracking, and real-time dashboards turn cash flow from a source of anxiety into a competitive advantage.
At TxCount, cash flow management is a core part of our fractional CFO service. We build 13-week rolling forecasts, implement weekly receivables tracking, and give you a real-time dashboard so you always know exactly where your cash stands.
Published by the TxCount Team — AI-powered compliance and fractional CFO services for growing businesses.