The main reasons for the occurrence of a "cash gap" and ways to avoid it

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Why does a cash flow gap occur and 5 ways to avoid it
1109
24.1.2025
Reading time: 4 min.

Author:
Olga Sysa
Corporate Finance Expert
Founder of his own consulting practice
A cash gap is a pain for entrepreneurs, both beginners and those who have been in business for a long time. In the company's financial management system, there are many indicators, metrics, the values ​​​​of which are interpreted differently, but everyone who has encountered it knows what a "cash gap" is. Corporate finance expert, founder of her own consulting practice Olga Sysa explained why a budget deficit occurs and how to avoid it.

Like a coin, this phenomenon has two sides. The only difference is who controls this process: the "cash gap" controls you or you control it.

In the first case, this is a problem that is fraught with serious consequences - violation of obligations to contractors for disruption of deliveries, purchases, to personnel for failure to meet the deadlines for payment of wages, to the tax office when tax day comes and there is no money in the account. The case may even end in bankruptcy and closure of the enterprise.

In the second case, the “cash gap” is part of the operating model of your business, and you, as an entrepreneur, always know when it occurs and how you will close it.

"Cash gap" is not a "cash gap"
Don't rush to get indignant. Before you solve the reason for the lack of funds and attract borrowed capital, make sure that the business is profitable and the "cash gap" is not a consequence of unprofitable processes.

The difference is, first of all, that a "cash gap" is a belgium email list problem with money. Remember the famous phrase by B. Berezovsky: "There was money, there will be money, now there is no money"? This is what a "cash gap" looks like. But if your operating model is initially unprofitable, then the budget deficit will be a permanent phenomenon in the company. Yes, you can hold out for some time on working capital, get hooked on the "credit" needle, but the ending of this story is quite predictable.

Attracting financing or closing cash gaps with personal money
What happens in this case:

You are missing the point that the reason is actually more serious than a lack of money in the accounts (see point 1).
Easy access to financing, the owner's personal money, credit lines and other options reduce the involvement of top managers to understand the true reasons for this event and look for options within the company. For example: carry out work on managing accounts receivable, review the policy of providing a deferment to buyers, while you yourself work on prepayment. And warehouse balances are a "graveyard" where millions of your working capital are buried.
Multiple and sharp growth of business