Cash flow: why profitable stores still go broke
Profit is an opinion on a spreadsheet; cash is what's actually in the bank. Stores die when inventory ties up money faster than sales free it, even with a healthy P&L, and growth makes the gap worse.
AI can project your cash position forward from your numbers. You supply the real timings (supplier terms, sell-through), because AI can't know them.
Fastest path: one prompt, end to end
🤖 AI prompt — paste into ChatGPT / Claude
You are a DTC cash-flow analyst. Use MY numbers only (invent nothing).
Cash on hand now: [$]
Monthly revenue: [$] Contribution margin %: [%]
Next inventory order: [$ and when I must pay it]
Supplier payment terms: [prepay / net-30 / etc.] Avg days from paying for stock to selling it: [#]
Monthly fixed costs: [$]
Do this:
1. Project my cash balance week by week for the next 12 weeks, given the inventory payment and fixed costs.
2. Flag any week the balance goes negative or below a safety floor I should set.
3. Compute my cash-conversion cycle (days cash is tied up in inventory before sales return it).
4. Recommend the 2-3 highest-impact levers to close a gap (deposit terms, smaller/more-frequent orders, a threshold to slow ad spend).
If a timing is missing, ask; do not guess.
Output: a 12-week cash projection + red-flag weeks + levers.
Or do it in 4 steps
- Separate profit from cash. A $10k profit month can still be a cash-negative month if you prepaid $30k for inventory that hasn't sold yet. Track the bank balance forward, not just the P&L, they answer different questions.
- Project cash 8-12 weeks out. A simple weekly sheet: starting cash + expected sales − inventory payments − fixed costs. The point is to see the low point coming while you can still act, not to be precise.
- Know your cash-conversion cycle. The days between paying for stock and getting paid for it. The longer it is, the more cash growth consumes, doubling sales can drain you if each sale ties up cash for 60 days first.
- Pull the levers before you're squeezed. Negotiate deposit or net terms with suppliers, order smaller and more often, or throttle ad spend when cash dips below a floor. Growth you can't fund is how profitable stores fail.
Worked example (labeled): you prepay $30k for stock in week 1, hold $10k cash, and sell it down over 8 weeks at ~$5k/week. Weeks 2-4 your balance goes negative even though every sale is profitable, that's the trap.
Seeing it in a projection lets you split the order in two or get net-30 terms before payday, not after the account bounces. Build your own 12-week sheet.
Update the projection weekly; the goal is to never be surprised by the low point, not to forecast perfectly.