Actualizado: 30/06/26
Many profitable companies on paper end up in serious difficulties, and even disappear, not because their business doesn't work, but because they run out of cash at the wrong time. Having profits is not the same as having money available in your current account, and that difference is precisely what operating cash flow measures: the real pulse of the company's cash.
Understanding and anticipating this indicator is one of the most effective tools for avoiding cash flow tensions, making decisions with room to manoeuvre, and sleeping soundly even when the business has seasonal ups and downs.
Operating cash flow
Operating cash flow is the cash flow generated (or consumed) by the main business activity, meaning its usual operations: customer receipts, supplier payments, payroll, rent, and other current expenses. Unlike accounting profit, which includes items that do not involve actual money movement—such as depreciation—operating cash flow reflects the actual inflow and outflow of cash and nothing else.
This distinction is key: a company can show profits in its income statement and, at the same time, not have enough cash to pay payroll, simply because its customers pay more slowly than it pays its suppliers.
Why is it so important to foresee it
Forecasting operating cash flow allows you to anticipate, weeks or months in advance, periods when the company might experience liquidity strains. This provides time to make decisions: negotiate a credit line, adjust payment and collection terms, postpone a non-urgent investment, or bring forward debt collection before the problem materialises.
Without this foresight, businesses react late, almost always under pressure, which usually translates into worse financing conditions, tensions with suppliers or, in the most serious cases, an inability to meet essential payments such as salaries or taxes.
How to calculate operating cash flow
There are two main methods for calculating it:
Direct method. All effective receipts derived from the activity (collected sales) are added together, and all effective payments related to that same activity (suppliers, salaries, supplies, current taxes) are subtracted. It is the most intuitive method, although it requires detailed recording of all cash movements.
Indirect method. Part of the accounting result (net profit) and adjusts it by adding and subtracting items that do not involve actual cash flow, such as depreciation, provisions, or changes in working capital (inventories, customers, and suppliers). It is the most commonly used method in practice because it directly relies on the information already generated by accounting.
In both cases, the result should be interpreted the same way: a positive operating cash flow indicates that the activity generates more cash than it consumes, while a negative one signals that the business, despite being potentially profitable in accounting terms, is absorbing more cash than it produces.
Keys to forecasting treasury effectively
- Build a periodic treasury budget
Beyond retrospective cash flow calculation, it is advisable to develop future cash flow forecasts, usually monthly or weekly depending on the company's size, estimating expected receipts and payments for the coming weeks or months. This tool allows for the advance visualisation of periods of greatest financial strain. - Analyse the average collection and payment periods
One of the factors that most impacts treasury is the mismatch between the period in which the company collects from its customers and the period in which it pays its suppliers. If the former is significantly longer than the latter, the company will be financing its customers with its own cash, creating tensions even if the business is profitable. - Monitor business seasonality
Many sectors experience markedly seasonal activity, with months of high turnover and others of minimal activity. Identifying these patterns allows for anticipation of periods of lower liquidity and the preparation of treasury buffers well in advance, rather than discovering the strain when it is already too late. - To differentiate between investment and current expenditure
Investment decisions – buying machinery, opening a new sales point, significantly increasing staff – must be planned taking into account their impact on short-term cash flow, not just their expected long-term profitability. A successful investment can become a problem if executed at the wrong point in the cash cycle. - To have a liquidity cushion
Having a cash reserve, however modest, acts as a buffer against unforeseen events: a customer delaying a significant payment, an unexpected bill, or a temporary dip in sales. This cushion should not be confused with idle capital; it is a risk management tool, not wasted money. - Periodically review deviations
Regularly comparing cash flow forecasts with actual data allows for model adjustments and the detection of previously unconsidered patterns, thereby improving the accuracy of future forecasts and the ability to react to business changes.
Warning signs not to ignore
Certain signs often anticipate liquidity problems before they become a crisis: a sustained increase in the average collection period from customers, sales growth that doesn't translate into proportional cash inflows, a recurring need for credit lines to cover running expenses, or dependence on a single customer or supplier that accounts for a large part of the cash flow. Detecting these signs in time, through regular cash flow monitoring, makes the difference between a brief strain and a serious liquidity crisis.
Conclusion
Operating cash flow is not just another accounting indicator: it is one of the metrics that best anticipates a company's real health. Calculating it and, above all, projecting it into the future allows for well-considered decisions, avoidance of last-minute surprises, and negotiation from a position of strength rather than urgency. A company that controls its treasury not only avoids liquidity tensions but also gains the necessary peace of mind to focus on growing its business.
At Lever, we help companies build reliable cash flow forecasts and implement financial control systems that anticipate problems before they occur. If you want to get your cash flow under control, let's talk.
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