Jim Johnson says the number one reason businesses fail is cash flow, not lack of profit. Even profitable companies run out of money if they wait too long to collect invoices. Cutting collection time from 60 days to 50 days can add $200 a day in operating cash.
Jim Johnson
December 26, 2025
Reducing collection days to 50 yields an example cash flow of $200 per day (on the same receivables base).
This one right here, cash flow gap. That one causes me to lose my business. The longer that amount of time is from the invoice to you collect it is the longer that you just became a bank, that somebody else has your money for the expenses and everything that you've already paid. And you're having to float all of those, hopefully with the profits you made on everything else. But that doesn't allow you to invest, it doesn't allow you to reinvest, it doesn't allow you to do the profit flywheel. So you start to run into this situation where I'm not selling enough and collecting enough to pay for my. And you're actually profitable. You're earning great margins, your volume is good. The problem is it's taken so long to go from invoice to collected, you can't float it. And you go out of business. And everybody's like, what the heck? How did that guy go out of business? They were doing $20 million a year, or 450 million or 650 million. But that time became too long. Your job is to reduce this as much as possible. And I'll give you that equation right here. So your goal, your number one goal is to reduce those amount of days as much as you possibly can. Because if you could just reduce it to 50 by that same 10,000, nothing changes there. Now I'm cash flowing $200 a day. Which businesses do you think are healthier and more profitable?
