The figure comes up in every study: between 75% and 80% of business failures are not linked to a profitability problem, but to a cash flow problem. The company has customers, a order book, sometimes even accounting profits. But it doesn't have the cash at the right time.
The gap that kills
The mechanism is simple: you pay your suppliers and employees before your customers pay you. This gap is called working capital requirement (WCR).
Concrete example: you are a craftsperson, you buy 5,000 euros of materials (payment at 30 days), you complete the job in 15 days, you invoice 12,000 euros (customer payment at 45 days). Result: you must pay the supplier 15 days before being paid by the customer. Multiply by 5 simultaneous jobs and the shortfall can reach 25,000 euros.
The 5 golden rules of cash flow
Rule 1: monthly cash flow forecast
Not the business plan forecast — that one is annual and too imprecise. A real monthly cash flow statement, ideally week by week, which lists:
- Expected receipts (invoices issued, deposits, subsidies)
- Certain disbursements (rent, salaries, social contributions, suppliers)
- Cash balance at end of period
Update this statement every week. You will see cash shortfalls coming 4 to 6 weeks in advance, which leaves time to react.
Rule 2: invoice immediately
The delay between completion of the service and issuing the invoice is wasted time for free. Yet many entrepreneurs wait until the end of the month to invoice in batches. Every day of invoicing delay is a day of cash flow lost.
Invoice on the day of delivery. Configure your invoicing software to issue automatically.
Rule 3: follow up without guilt
A customer who doesn't pay on time, it happens. But waiting 3 months before following up is your mistake. Put an automatic follow-up process in place:
- D+3 after due date: email reminder (friendly tone)
- D+10: phone follow-up
- D+20: formal notice by registered mail
- D+30: referral to a collection agency
Most payment delays are resolved with the first follow-up. The problem is when no one follows up.
Rule 4: build a safety cushion
The standard recommendation is to have 2 to 3 months of fixed expenses available in cash. For a company with 8,000 euros in monthly expenses, this represents 16,000 to 24,000 euros.
This cushion is built gradually: set aside 5% of each receipt in a dedicated account. After 18 months, you have your reserve.
Rule 5: negotiate payment terms upfront
With your suppliers, negotiate longer payment terms (45 or 60 days). With your customers, negotiate deposits upon order (30% to 50%). The objective is to reduce WCR, that is, the gap between disbursements and receipts.
WCR financing tools
When the cash shortfall is structural (your activity requires it), several solutions exist:
- Factoring — you sell your invoices to a company which immediately pays you 80 to 95% of the amount. Cost: 0.5% to 3% of the invoice.
- Dailly — pledging of professional receivables to your bank. Cheaper than factoring but more rigid.
- Discounting — advance on bill of exchange. Classic but declining.
- Overdraft facility — negotiate it before you need it. When you're in the red, the bank is less inclined to help you.
Cash flow is managed, it is not endured. A good forecast is worth more than ten prayers.