Cash flow is not profit: managing liquidity in a Norwegian SMB
One of the hardest conversations we have is with a business owner who has just had their best year on paper — and can't make payroll. Profit and cash are not the same thing, and the gap between them is where otherwise healthy Norwegian companies get into trouble.
Where the money hides
Your income statement can show a comfortable profit while your bank balance tells a very different story. The cash is usually stuck in a few familiar places:
- Receivables. Revenue booked but not yet collected. Long payment terms with big customers quietly finance them at your expense.
- Inventory. Cash converted into goods sitting on a shelf.
- Tax and VAT timing. MVA and employer's contributions come due whether or not customers have paid you.
- Seasonality. Holiday pay (feriepenger) and quiet summer months can hit liquidity hard if you haven't planned for them.
Profit is an opinion. Cash is a fact.
Build a 13-week cash forecast
The single most useful tool for an SMB is a rolling 13-week cash forecast: expected inflows and outflows, week by week, for the next quarter. It's short enough to be accurate and long enough to give you time to act. Update it weekly and you will see problems weeks before they arrive — when you still have options.
Shorten the cash cycle
Once you can see the cycle, you can shorten it. Invoice the day work is done, not at month-end. Ask for deposits on large orders. Negotiate supplier terms that match your collection reality. Chase overdue invoices early and without apology — it's your money.
Keep a buffer, on purpose
Decide, deliberately, how many months of fixed costs you want to hold in reserve, and treat that buffer as untouchable. A credit facility arranged before you need it costs almost nothing and can save the business when a big customer pays late.
None of this is complicated. But it does require attention — and the discipline to look at cash as closely as you look at sales. Do that, and a great year on paper becomes a great year in the bank too.