An SME increases its monthly sales from RM100,000 to RM150,000.
Customers take 60 days to pay, but suppliers must be paid within 30 days.
Is the additional RM50,000 in sales automatically good for cash flow?
Not necessarily.
Before collecting the additional sales, the business may need to pay for inventory, employees, deliveries and other operating expenses.
The sales could be profitable while cash becomes tighter.
To manage growth properly, an SME should:
- Monitor receivable and inventory days
- Match customer and supplier payment terms
- Estimate the working-capital funding gap
- Prepare a rolling cash-flow forecast
- Arrange funding before cash pressure becomes critical
Growth is valuable—but sustainable growth requires sufficient working capital.
Has your business ever faced cash-flow pressure while sales were increasing?