Diagnostic Tool
Growth Cash Requirement Simulator
This diagnostic demonstrates why revenue growth can increase the demand for cash even when the business appears profitable. As sales expand, the capital locked in receivables, inventory, and the operational cycle grows proportionally, creating a funding requirement that profit alone may not satisfy.
In operating businesses, this dynamic appears when growing companies face cash pressure despite strong order books and improving margins. More revenue generates more receivables that must be funded before collection. More orders require more inventory to be purchased before invoicing. This working capital expansion must be financed, and the faster growth occurs, the more acute the cash requirement becomes.
Understanding growth cash requirements matters because expansion decisions are often made on the basis of projected profit without modelling the working capital impact. A business growing into cash pressure is structurally more vulnerable than it appears from the profit and loss account alone.
Average monthly invoiced revenue at the current run rate.
Monthly growth rate expected over the projection period.
Gross profit as a percentage of revenue for cash flow modelling.
Average days between invoicing and receiving customer payment.
Average days before paying supplier invoices.
Number of months to project growth and working capital impact.
Average days of stock held if the business carries inventory.
Available cash and liquid reserves to fund working capital growth.
Available credit facility to supplement working capital funding.
Many of the inputs requested by this diagnostic are metrics that disciplined operators typically monitor through internal management reporting. If a number requested here is not immediately available it often indicates that the current reporting structure does not isolate that metric clearly. Businesses operating with strong financial visibility normally track these figures regularly because they influence pricing decisions, supplier negotiations, operational planning, capital allocation, and risk management. Part of the work performed by MJB Strategic often involves helping companies design internal reporting structures that surface these metrics consistently so management can make better operational decisions.