A year of rising turnover looks, at first glance, like confirmation that things are going well. But turnover measures how much you sold, not when the money actually arrives — and it is precisely in that gap that many small manufacturers run into difficulty.
Collection terms against payment terms
If customers pay at 60 or 90 days while material suppliers want paying at 30, the business has to fund the difference from its own resources or from the bank, however healthy the margin looks on paper. Rising turnover, if collection times worsen, can actually increase the strain rather than relieve it.
Investments that absorb cash
A new machine, a stock of material for a large job, hiring another worker: all absorb cash before they generate the expected return. Judging them only by the margin they promise, without considering the effect on cash over the following months, can create avoidable financial strain.
Look forward, not only back
A cash projection for the coming weeks — money expected in from customers, money due out to suppliers and staff — gives a far more useful picture than reading past turnover alone. It is the tool that lets you anticipate a cash squeeze rather than discover it when the account is already under pressure.