Interview with Ankit Sarawagi, Curator, CFO Matrix

Cash is where a founder’s real position shows up. Revenue reflects sales; cash is the money the business has actually collected. I start with the collection cycle — days sales outstanding, or the average time it takes a sale to turn into cash. In one SaaS company, it ran near 90 days while the team celebrated top-line growth. Bringing it to roughly 40 days cut about 50 days off that cycle, releasing a one-time slug of working capital equal to around 50 days of credit sales. The exact figure tracks the sales run rate; the mechanism is that cash sitting in receivables returns to the business. I make cash visible weekly so founders read it as a leading signal, well ahead of any month-end surprise.

I began by ensuring that the financial statements contained the correct numbers. This typically involved months of reconciling and closing the books. While this work is important, it is typically backward-looking. Other aspects of my role moved me toward looking to the future. More specifically, co-founders started to approach me for input on forward-looking questions. These included elements of the business, such as financial projections and business economics. Ultimately, these aspects of my role focused on using the skills and experience I developed in finance and accounting to help business leaders raise capital and make key strategic decisions. This has been the case at multiple fast-growing businesses I have worked for. Recently, I have been involved in Series A and Series B financings and related discussions with founders. Overall, the work I do now helps founders look to the future and maintain clarity as they steer their businesses.

Treating these three aspects of a business, particularly revenue and profit, interchangeably can be harmful. Revenue and profit are accounting figures that illustrate a business’s financial status. Cash is real money. A business may have good revenue and profit but no cash. Cash is usually tied up in business inventory and/or receivables. The business may not be able to pay its employees and may have to borrow money to do so. I once evaluated a direct-to-consumer (D2C) company that, from an accounting perspective, showed profits and revenue but could not pay its employees because cash was tied up in inventory and accounts receivable. A founder must keep these three aspects, particularly cash, under control.

A weekly view provides more timely insight into your business' cash position than a historical tax return. I expect founders to track four signs:

• Cash collections: Was the sale real?

• The cash balance in relation to committed outflows.

• Runway: Do you have enough cash to last until the next financing?

• Aging receivables: When do you expect to be paid?

Cash collections focus founders on the signs they should use to manage the business. Each week, founders learn to use cash collections to steer the business.

What I watch for is an upward trend in the average collection period, coupled with rising sales. Founders focus on the positive — rising sales — and overlook that the collection period is increasing. The longer the collection period, the more of the company’s capital is funding customers rather than the business itself. The mirror image on the payables side is the company stretching the terms it has negotiated with its own suppliers to stay liquid. It can do this only for a limited time before those relationships become strained. I like to look at the collection period as a trend over several months rather than month to month. Viewed that way, it usually shows where collections are heading a few weeks in advance.

In any inventory-led business, cash planning turns on timing. I have seen this most closely in D2C, where the mechanics mirror what capital-heavy sectors face. A founder commits cash to stock weeks or months before a customer pays, so the cash conversion cycle governs how fast the business can fund its own growth from internal cash. Shortening the time inventory is held or negotiating longer terms with suppliers releases cash that was tied up in the cycle. That cycle sets a ceiling on self-funded growth rather than on profit; profit follows from margin, while the cycle decides how quickly cash recycles. A founder can still grow faster by raising capital or improving terms. The point is to plan against the cycle so a large growth order becomes a funded decision rather than a cash surprise.

Have flexibility in your forecast. Known deviations from your assumptions should not require a complete rebuild of your financial model. Founders should identify and articulate their core assumptions as part of their cash view. Core assumptions may include collection dates, burn rate, and outflow assumptions. These assumptions should be documented in such a way that if the market changes or the assumptions evolve, the core of the model remains intact. The remaining components of the model should be flexible enough to accommodate evolving core assumptions. Founders should also evaluate cash flow in the context of different scenarios, such as best-case and worst-case scenarios. A forecast should reflect management’s judgment based on the latest information and provide insight into potential cash flow issues before they occur. A published forecast should be reviewed against actual cash flow to reflect and update management’s understanding of the underlying business.

I ask founders to articulate the question an expense is intended to answer. Money should be spent to answer questions, and answers should be used to make decisions.

There are questions related to the price at which a company is acquiring customers, the longevity of a market, and a company’s product and its ability to retain customers. The outcome of an expense should answer a question related to one of these areas.

I require founders to state the question and the answer that would negate the assumption. The outcome of the expense should allow the founder to learn something that justifies answering the question.

I also believe that there should be a time constraint on each expense. A budget should reflect the questions a company has and the answers it is seeking.

The habit is knowing your cash runway down to the week and watching it as closely as sales. A founder who can state how many weeks of cash remain at the current burn rate can open a raise with room to spare, on their own timing rather than against a near-empty account. I saw this in a SaaS business where collections ran near 90 days and cash felt perpetually tight. Once the founder tracked runway weekly and we brought collections to around 40 days, the pressure eased, and the next round happened on a planned schedule. Discipline of that kind tends to build investor confidence, since a clear command of cash signals a founder who understands the business. It strengthens credibility and the founder’s position going into a raise, which supports the conversation on terms.

I think we have covered it all. Thanks for the conversation.