Why revenue can grow while cash goes down

Why revenue can grow while cash goes down

1. Short introduction

Revenue growth is usually celebrated as a clear sign of progress. Yet many founders are surprised to see cash balances decline at the same time, even when the business appears to be doing well.

2. The problem finance teams face

This situation often triggers confusion and tension between finance and the rest of the company. Founders see growing revenue and assume the business is generating more cash. Finance teams, meanwhile, warn that cash is tightening and decisions need to be adjusted.

The problem is not poor performance, but misunderstanding. Revenue growth and cash flow are related, but they do not move in lockstep. When this distinction isn’t clear, teams risk making aggressive growth decisions precisely when liquidity is becoming constrained.

3. Why this is hard today (systems, NetSuite, processes)

Most companies track revenue closely because it’s visible, intuitive, and well-supported by systems. Cash flow, on the other hand, is harder to interpret. It depends on timing, structure, and operational details that are not obvious from top-line numbers.

In systems like NetSuite, revenue reporting is straightforward, while cash requires stitching together data from receivables, payables, inventory, and accruals. The mechanics of working capital often live across multiple reports and modules. As a result, many teams review cash only at a high level and miss the operational drivers behind it.

This gap between revenue reporting and cash understanding is why the question keeps coming up: “How can we be growing and still running out of cash?”

4. How teams usually try to solve it (and why it fails)

Common reactions tend to fall into a few patterns:

• Blaming growth itself: Teams assume growth is “too fast” without understanding which part of growth is consuming cash.
• Looking only at the bank balance: Cash is reviewed as a single number, without linking it back to receivables, payables, or inventory.
• Ad-hoc explanations: Finance provides one-off explanations each month, but there’s no shared framework the business can reuse.

These approaches fail because they treat cash as a standalone metric, rather than the outcome of operational decisions. Without connecting revenue growth to working capital dynamics, the same confusion reappears every quarter.

5. What a better approach looks like (conceptual, practical)

A better approach starts by reframing the conversation. The key question is not “Why is cash down?” but “Which parts of our growth are consuming cash?”

In practice, this means focusing on working capital:

• Are customers paying later as revenue grows?
• Is inventory building ahead of sales?
• Are suppliers being paid faster than before?

Understanding these drivers helps founders see that cash flow is not about performance alone, but about timing and structure. This is why cash flow analysis should always be paired with an explanation of movements, not just a summary of balances. Teams that struggle with this often face the same issue seen in other finance topics: numbers are reported, but the underlying logic is not clearly explained.

6. How modern finance teams handle this today

Modern finance teams aim to make cash flow part of their regular operating discussions, not an occasional warning signal. Instead of waiting for month-end, they track working capital trends continuously and explain how growth decisions affect liquidity.

This also highlights why dashboards alone are not enough. Dashboards can show that cash is declining, but they rarely explain which operational levers are responsible. Understanding these limits helps teams move from reactive explanations to proactive conversations.

Teams that do this well often review cash weekly, alongside revenue and margin, to catch issues early. This cadence allows founders to adjust pricing, payment terms, or growth plans before cash becomes a constraint.

Tools like Simon support this by sitting on top of NetSuite and helping teams connect revenue growth, working capital, and cash movements into a single explanation. Instead of manually pulling reports, finance can focus on explaining what’s happening and what needs to change.

7. Final takeaway

Revenue growth is a sign of demand. Cash flow is a reflection of how that demand is financed. When the two move in opposite directions, it’s rarely a contradiction—it’s a signal.

For founders, the goal is not to slow growth blindly, but to understand which parts of growth consume cash and why. When revenue and cash are discussed together, using a shared framework, finance becomes a strategic partner rather than the bearer of bad news.