80% of startup businesses fail in the first 5 years and 50% of those fail because of cash flow issues. I hate to see so many failures because of cash flow when it’s something that can be prevented or mitigated. One major cash flow killer in a business is the slowdown of collecting accounts receivable. Here’s what you need to know:

1. Sales per day is calculated by taking last year’s revenue and dividing it by 360 (twelve 30-day periods). For a $5 million business, sales/day is $13,888. So for this business, any fluctuation of 1 day faster or slower causes an increase or decrease in cash flow by that amount. 5 days of collecting receivables faster or slower has a $69,000 impact on cash flow. Also, if sales decline, this will result in a drop in cash coming into your business. 

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