To get rid of cash flow gaps and increase the company's solvency, you need to work in two directions

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Remember: you can improve your solvency, that is, the ability to pay your expenses on time and without “stress”. To do this, you should work with the financial cycle.

Every company has an operating cycle - the time it takes for raw materials and supplies to turn into a finished product, and the sold product into revenue. For example, raw materials were purchased and processed at a manufacturing facility. The products sat in a warehouse for a while, were then sold on a deferred payment basis, and when the algeria whatsapp number data deferred payment period expired, you received payment. It all took 120 days. That's your operating cycle.

Some days of the operating cycle are financed by deferrals from suppliers. Let's say 40 days. Then the remaining 80 days are your cash cycle or the number of days that must be financed with equity or debt.



To calculate the financial cycle in money, that is, how much money a business needs, all expenses for the period (for example, for a year) must be divided by 365 days and multiplied by the financial cycle in days.

For example, all expenses amount to 15 million rubles. The calculations will look like this: 15,000,000 / 365 * 20 = 821,918 ₽.

This is the amount your business needs each month to operate. Here you will see if the money coming in is enough to cover the business's cash needs. If not, there is a cash gap.