Cash Flow Fundamentals: The Numbers That Keep Businesses Alive

Profitable companies go bankrupt. Here is why.

A US Bank study found that 82% of small business failures are caused by cash flow problems — not bad products, not weak markets, not poor strategy. Cash flow. The tragedy is that many of these businesses were profitable on paper. They had more revenue than expenses over any given month. But they still ran out of cash.

This happens because of the timing gap: you pay your suppliers in 30 days, your employees on the 1st, and your rent on the 5th — but your clients pay you in 60–90 days. Your P&L says you made money. Your bank account says you're out.

The three numbers you must know every week

1. Burn Rate

Your total monthly cash outflow: salaries + rent + vendor payments + subscriptions + loan EMIs. This is what it costs to keep your business running for 30 days regardless of revenue.

Formula:

Monthly Burn Rate = Total Monthly Expenses (Cash Out)

2. Cash Runway

How many months can you operate if revenue stopped tomorrow?

Runway (months) = Cash in Bank ÷ Monthly Burn Rate

A runway under 3 months is a red alert. Under 6 months, you should be actively raising cash or cutting burn. Above 12 months, you have the freedom to invest in growth.

3. Collection Efficiency

What percentage of your billed revenue actually arrives in your bank account on time?

Collection Efficiency = Cash Collected ÷ Invoices Issued × 100

Below 80% means your collections process is broken — you're generating revenue on paper that isn't becoming cash.

How Proactiq Finance shows you these numbers automatically

Go to Finance → Analytics. Your dashboard shows in real time:

• Total invoiced this month vs. last month (trend line)
• Total collected — cash actually received, not just billed
• Outstanding invoices — what's owed to you, broken down by age (0–30, 31–60, 60+ days)
• Total expenses approved and paid
• Net cash position — the number that matters most

These update the moment any team member records a payment, approves an expense, or marks an invoice as paid. You don't calculate runway once a month — you see it live.