Profit is theory—cash is reality.
Cash flow metrics reveal how money actually moves through your business. They’re the lifeblood of operational health, investment readiness, and strategic resilience. This post explores why cash flow deserves a permanent seat at the strategy table—and how leaders can use it across time horizons.
What Is Cash Flow?
Cash flow tracks the net movement of money in and out of your business. Key types include:
- Operating: Cash from core business activities
- Investing: Cash used for or earned from investments
- Financing: Cash from debt, equity, or dividends
Together, these form the cash flow statement, a critical complement to your income statement and balance sheet.
Why It Matters
- Liquidity: Can we cover short-term obligations and unexpected costs?
- Sustainability: Are we generating enough cash to fund operations and growth?
- Strategic Flexibility: Do we have the runway to pivot, invest, or weather downturns?
- Board Confidence: Cash flow clarity builds trust and enables better decisions
Spotlight: Free Cash Flow (FCF)
Free Cash Flow is what leaders actually control.
FCF measures the cash left after operating expenses and capital expenditures. It’s the money available to reinvest, pay down debt, distribute to shareholders, or build reserves.
Why FCF Matters
- Signals true profitability beyond accounting earnings
- Enables strategic reinvestment without external capital
- Reveals operational efficiency and capital discipline
Strategic Questions
- Are we generating enough FCF to fund our goals?
- What’s driving changes in FCF—margin, capex, or working capital?
- Are we balancing reinvestment with liquidity?
Planning Across Time Horizons
Cash flow isn’t just a snapshot—it’s a storyline. Leaders must plan across horizons:
Short-Term (0–12 months)
- Focus: Liquidity, payroll, vendor payments, seasonal cycles
- Tools: Rolling forecasts, burn rate, working capital analysis
- Goal: Avoid surprises and maintain operational control
Long-Term (1–5 years)
- Focus: Strategic investments, debt service, expansion runway
- Tools: Scenario modeling, capital budgeting, FCF projections
- Goal: Align cash strategy with growth and mission
Strategic Questions
- Are we modeling both short-term needs and long-term ambitions?
- What assumptions drive our long-term cash flow scenarios?
- How do cash flow plans inform board-level decisions?
Final Thought
Cash flow metrics are more than financial hygiene—they’re strategic instruments. Free Cash Flow reveals what’s truly available. Short-term planning protects operations. Long-term planning empowers growth. Together, they give leaders the clarity and control to build businesses that last.
Want help modeling cash flow scenarios or integrating cash metrics into your board reporting? Let’s talk.
This post is part of the Behind the Metrics series.
Explore others on CAC, LTV, ROAS, Conversion Rate, ROI, Churn Rate, Gross Margin, NPS, and The Metric That Wasn’t.