We struggle with unpredictable cash crunches despite our sales metrics looking strong on our weekly scorecard. What leading indicators should our finance seat track to ensure our working capital is actually keeping pace with our revenue growth?

Question

Tyler Smith · Accepted Answer

Strong sales numbers can easily mask a brewing cash flow crisis, especially in a growing service business. If your scorecard only tracks closed deals and revenue, you are blind to the working capital required to fulfill those contracts. To prevent cash crunches, your finance seat must track weekly leading indicators that measure the velocity of your cash cycle.

The first critical metric is day sales outstanding, which measures how long it takes for your clients to pay their invoices. A rising trend here means your cash is locked up in accounts receivable while you are paying out-of-pocket expenses for delivery. The second metric is the billing backlog, which tracks completed work that has not yet been invoiced. If this backlog is growing, your billing processes are inefficient.

Finally, track your weekly cash runway, which is your current cash balance divided by your average weekly operating expenses. This gives you an immediate, real-time look at how many weeks of operations your cash can support without new inflows.

By putting these metrics on your weekly scorecard, you bring visibility to the operational side of finance. Your leadership team can then use the Level 10 Meeting™ to address collection issues and billing delays before they escalate into a cash flow emergency that threatens your business operations.