A business can increase turnover and, at the same time, have less money available. To understand this apparent contradiction it is necessary to distinguish sales, economic result and cash movements. Revenue records business activity; cash receipts indicate when funds become available to make payments.
Consider a hypothetical example. A company sells goods for 10,000 euros, granting the customer ninety days to pay off. If the supplier is to be paid within thirty days, the interval between the exit and the entry of the money must be financed. A positive margin on sales does not eliminate this need. In the example we neglect VAT and other costs to isolate the problem of the times.
Even the warehouse can absorb resources: buying products that remain on the shelves means committing money before recovering it. Growth can then require additional capital, especially if it simultaneously increases the amount of stock and credit granted to customers.
A useful reading combines sales with a calendar of receipts and payments. IAS 7 distinguishes the flows of operating, investing and financing activities: this separation helps to understand where the cash comes from, without assuming that the standard applies to any small business.
The management question then becomes concrete: which sales produce margin, when will they be collected and which payments precede them? Planning these deadlines makes it possible to assess whether growth is financially sustainable.