3 cash flow mistakes killing profitable businesses

Profitable on paper. Broke in reality. This isn't a hypothetical—it's the most common way Australian businesses die. Revenue is vanity. Profit is sanity. But cash flow is reality. Here are the three mistakes that kill profitable companies.

Mistake One: Confusing Profit with Cash

Your P&L says you made money. Your bank account says otherwise. This disconnect destroys businesses every day. Profit is an accounting concept. Cash is what pays your bills.

The gap comes from timing. You book revenue when you invoice, not when you get paid. You record expenses when you incur them, not when you pay them. Meanwhile, payroll is due Friday whether your clients have paid or not.

The fix: track cash weekly. Know your runway. Understand the lag between making a sale and collecting the money. Profitable companies run out of cash all the time—don't be one of them.

Mistake Two: Growing Too Fast

Growth feels good. It validates your business. But rapid growth is expensive. You hire ahead of revenue. You buy inventory before it sells. You expand before you're ready.

Every new customer requires working capital—materials, labor, overhead. If you're growing 20% per month, you need cash to fund that growth. Most businesses don't have it. They grow themselves into bankruptcy.

The solution isn't to stop growing. It's to grow sustainably. Match growth to cash generation. Or raise capital specifically to fund expansion. But don't assume revenue growth automatically creates cash. It usually does the opposite.

Mistake Three: Ignoring Payment Terms

You give customers 30-day terms. Your suppliers want payment in 14 days. That's a 16-day gap where you're funding someone else's business with your cash.

Multiply this across all your transactions and you've built a cash flow black hole. The fix is simple but uncomfortable: negotiate harder. Get paid faster. Pay suppliers slower. Offer discounts for early payment. Charge interest on late invoices.

Good businesses optimize gross margin. Great businesses optimize the cash conversion cycle. The faster you turn operations into cash, the more resilient you become.