Diagnose Before You Prescribe

Before you try to fix a cash problem, take an X-ray.

I use a simple five-question diagnostic with business owners. It takes about 30 minutes.

The five questions

• Cash — What do you actually have? Not what the P&L says. What is available in the bank right now?
• Collections — How quickly are customers paying you? Revenue you've earned isn't much help if the cash hasn't arrived.
• Commitments — What have you already promised to pay? Payroll. Vendors. Taxes. Debt. Expenses already coming whether you have a good month or not.
• Capacity — How long could the business keep operating with the cash it has?
• Controls — What rules keep cash from becoming a surprise? Deposits. Spending approvals. Collections. Payment timing.

The symptom isn't always the problem

A business feels short on cash, so the owner cuts marketing. But maybe sales aren't the problem. Customers are simply paying too slowly.

Another owner freezes hiring. But maybe payroll isn't the problem. Too much cash is tied up in overdue invoices.

Another reaches for a loan. But maybe the business doesn't need more debt — it needs to collect the money it has already earned.

That's why you diagnose before you prescribe. The 5C Diagnosis doesn't make decisions for you. It makes the real problem harder to miss.

And once you can see the real problem, you can stop treating symptoms and start fixing causes.

So here's the question: if we took a 30-minute cash X-ray of your business today, what would it reveal?

From Chapter 2 of The CFO Operating System — The 5C Diagnosis.