Introduction
Many businesses don't fail because they lack customers or profits. They fail because they run out of cash, often suddenly, and avoidably.
At Pumpkn, we’ve seen this repeatedly: growing businesses with full order books, strong margins, and even profit on paper, yet unable to pay suppliers or make payroll. Why? Poor cash flow management.
Why Cash Flow (Not Just Cash) Is What Really Matters
Cash is static. Cash flow is dynamic. It is the real-time movement of money in and out of your business. And it’s the timing and pattern of these flows that determine your ability to survive and grow.
You can:
- Have R200,000 in the bank today, and still fail if large outflows are due next week and your receivables won’t arrive for 60 days.
- Be profitable on paper, but suffer cash starvation if your working capital cycle isn’t tightly managed.
👉 Healthy cash flow = predictability, resilience, and readiness for growth.
The 5 Hidden Traps That Derail Cash Flow
1. Delayed Payments from Customers
- Offering 30-day terms, but customers pay after 60 or 90 days.
- Large buyers (like retailers or the government) stretch your receivables cycle. You think they are good payers, you keep supplying them, yet revenue collection is a headache. We have seen this time and again with clients. Keep your customers in check. Don’t dig a hole.
- No follow-up process for collections. Be on top of it. Understand the invoice and payment process. Build a relationship with the people responsible for paying you at your clients.
🔥 Cash is booked as revenue, but not in your bank, leading to a liquidity crunch.
2. Mismatch Between Income and Expenses
- Revenue is seasonal (e.g. harvests), but costs like salaries, rent, or utilities are monthly.
- Projects or contracts have long payment cycles, but your input suppliers demand upfront cash.
🔥 You’re constantly “bridging the gap” with overdrafts, late payments, or borrowing.
3. Sudden Cost Shocks
- Price increases in inputs (e.g. fertiliser, packaging).
- Equipment breakdowns or emergency repairs.
- Load-shedding disruptions increasing operational costs.
🔥 These aren’t always predictable, so your buffer matters.
4. Overtrading
- Rapid growth without sufficient working capital.
- Taking on large orders without upfront deposits or financing.
- Hiring staff or investing before cash flow stabilises.
🔥 Growth eats cash before it generates it.
5. Debt Repayments Poorly Aligned to Cash Flow
- Balloon repayments with no buffer.
- Fixed monthly instalments when revenue is lumpy.
- High debt service ratio, leaving no room for error.
🔥 Even a profitable business can default if repayments aren't timed to inflows.
What You Need to Track (Monthly)
The best entrepreneurs don't just check if there’s “money in the account.” They monitor their cash flow like a hawk. Here's what to look at regularly:
| Metric |
What It Tells You |
| Cash Flow Forecast |
Can you meet all obligations over the next 4-8 weeks? |
| Receivables Ageing |
Are your customers paying on time? Who’s late? |
| Payables Schedule |
Are you timing your payments to match inflows? |
| Burn Rate |
How much cash are you spending each month? Is it sustainable? |
| Working Capital Cycle |
How long is your cash tied up before coming back in? |
💡Tip: Use a rolling 13-week cash flow tracker. Even a simple spreadsheet can give you visibility and time to act.
Pitfalls to Avoid
| Mistake |
Why It’s Dangerous |
| Using revenue to judge cash position |
Revenue doesn’t equal received cash. |
| Ignoring small payment delays |
They accumulate quickly and create a knock-on effect. |
| Relying too heavily on one or two clients |
If one delays, your entire cash flow collapses. |
| Assuming a loan will arrive in time |
Never plan cash flow based on expected funding. |
| Paying suppliers faster than you collect from clients |
This extends your cash conversion cycle dangerously. However, sometimes beggars can’t be choosers. We get it. |
Strategies to Strengthen Cash Flow
- Negotiate better terms: if possible, ask suppliers for e.g., 30-day terms and offer early payment discounts to customers.
- Invoice immediately: Understand the system and process. Don’t wait to invoice. Delays mean delays in getting paid.
- Automate follow-ups: Use reminders and systems to chase overdue invoices. Know who to call.
- Build buffers: Aim for 1–3 months of operating costs in reserve.
- Structure repayments smartly: Align repayment schedules with revenue patterns.
- Use short-term financing: Consider working capital loans, factoring, or revolving facilities only if they close timing gaps.
Final Word: Cash Flow Is the Pulse of Your Business
Profit looks good on paper.
Cash feels good in the bank.
But cash flow is what keeps you alive and able to grow.
At Pumpkn, we don’t just fund businesses. We help them stay fundable by building better cash flow habits. If you’ve got strong inflows, good timing, and control over your cycle, you’re a step closer to scaling confidently.
