If you liked this article, you might like the book The Goal or its application to the “project context” that software companies find themselves in, Critical Chain. They define a lot of business thinking as being focused on controlling costs, when in fact you want to first maximize revenues, and the kind of funky idea of measuring “dollar days” that one eventually gets to is an attempt (which I actually don't think is successful, but maybe it is approximately okay) to start to bring cash flow ideas to consciousness.

I believe The Goal is where I first read about this idea about cash flow being more important than revenue, in a way that can be easily explained to anybody: you have bills, you have a certain amount in the bank, and then you have in accounting a set of invoices that you have sent out to customers but they have not yet been paid. So that money is “as good as earned” on paper but it’s not yet in the bank. And the problem is not revenue, the problem is cash flow. If you don’t have enough in that bank account, then after paying for your materials and rent for your building and whatever else, you suddenly come up short on payroll. “Please forgive me,” you tell your employees, “we have the money and your paychecks will just be a week late, we are so sorry, this never happens normally.” Good way to lose a lot of your best minds that really make your money—your best salespeople, your best engineers, your hardest workers. They got rent to pay. In The Goal I believe the book points out that most companies that go under don’t have a revenue problem but a cash flow problem, the money isn’t coming in fast enough to pay to keep the company running even though it is coming in eventually.

there are a couple of other ways to look at it that may be helpful to the broader community, one of them is that your interest rate on debt actually sets a time scale for your “indefinite future.” If you have credit card debt at 36%/year compounded monthly that’s 3%/month, flip that to (1 month)/(.03) = 33 months. Now if I ask you “hey, how much is that $20 per month subscription worth to you in terms of present value?” you can answer: that subscription runs out into the indefinite future so it gets multiplied by this time scale and it is worth $660 to me right now. Which is another way to say equivalently that if I bought something right now for $660 I would pay $20/month for the indefinite future. Lots of people don’t realize how much present value they can unlock by just canceling out old subscriptions like that, because the cash flow is not there immediately, but it’s true.

Similarly, I ran into cash flow issues at the beginning of this year in my personal finances. With COVID-19 hitting at around the same time my auto loan asked me if I wanted several months deferral. Are you shitting me right now? Yes, the added productivity and lack of stress from having a floating several hundred dollars in the bank and therefore being able to set up auto-pay (and not incurring late fees on all my accounts) pays for itself and then some. Thank you so much! (Of course the bank is a bank, this is cold hard calculus to them, so I don't feel too bad. Imagine that, too, though! Imagine that if you are in a good cash flow position, as the bank is as covid starts, your reaction might actually be to turn away cash flow: you are a sort of landlord collecting rents and you need to mitigate the risk that all your tenants go broke, they need to be able to keep their jobs for your wellbeing. And then you think of the actual landlords and you realize that the system must have left them relatively strapped for cash if they’re not similarly absorbing some of the shock. And that launches into interesting questions about feedback mechanisms in complex systems and their modes of resilience.)