Cash Flow
Operating cash flow is the number your bank believes
The problem
Owners track revenue and net income. Lenders, buyers and reality track the cash the operation actually generates.
Why it matters
Operating cash flow determines what you can invest, distribute and borrow. Profit determines what you are taxed on. They are not the same number and the difference is where most surprises live.
How to know if you have this
- Net income is positive while cash is flat or falling
- You cannot explain the gap between profit and cash
- Distributions are set without reference to cash generated
- Lender conversations focus on numbers you do not track
How Advisory Motion solves it
- 01Reconcile profit to operating cash flow every month, line by line
- 02Separate operating performance from financing and owner decisions
- 03Set a distribution and reinvestment policy based on cash generated, not profit reported
- 04Prepare the metric lenders and buyers will ask for before they ask
Illustrative example
$480K of profit, $95K of cash
The reconciliation showed inventory build and owner draws consumed the difference. Once visible, the owner reset draws to a quarterly policy tied to operating cash flow and stopped the drift.
Illustrative composite · not a client identification
Where this connects