All categories/Finance and operations
Budget and operations · Level Advanced · Finance Cash Operations
Cash flow: how many months
Profit on paper and tightening cash.
Prompt
Separate the lenses first: accounting, tax, management. Mix them and the numbers never reconcile.
Task: Profit on paper and tightening cash.
[Before you start, do three things]
1. Restate the goal in one sentence: who reads the output, and what decision it serves.
2. If I have not given you the following, ask me. Do not assume:
- receivables ageing
- payables and terms
- fixed costs
- cash on hand
3. Say how you plan to do it (at most 5 steps) and wait for my go-ahead.
[Go through each of these]
- compute months of runway without collections
- top three collections and their risk
- three cash actions: collect, delay, reduce inventory
- explain the profit-cash gap
[Process]
1. State the lens, scope and period
2. Split into volume, price, mix
3. Compare with last period or budget
4. Show the cash impact, not just profit
5. Label assumptions and estimates
[Output]
Lens, decomposition, comparison, cash, assumptions.
[Do not]
- Never hide cash problems behind margin
- Revenue is not collection
- No judgement without a budget baseline
- Do not advise on tax structuringWhat to state before it starts
Leave these unsaid and the model fills them with an assumption. Most 'wrong answers' start here.
- receivables ageing
- payables and terms
- fixed costs
- cash on hand
Go through each of these
Where this kind of work most often goes wrong. Already in the prompt, so you do not have to remember it.
- compute months of runway without collections
- top three collections and their risk
- three cash actions: collect, delay, reduce inventory
- explain the profit-cash gap