What is cash timing?

Cash timing simply put is how your revenue and expenses impact the cash you have access to at any given time. But timing your cash flow is, in a word, complicated. If you want to piece together what’s happening with your cash e.g. your cash timing, you need to pull dozens of different reports from QuickBooks Online or Xero, all the way down to the transaction level, or you’ll miss >90% of the detail. Then need to trace each transaction to its source, jumping across multiple reports, before you can start to see the real-world behavior behind each cash movement and understand what it means in aggregate. Not only is this process time-consuming and risky, but it only tells you about the past.

The importance of cash timing

Knowing when the money hits your bank is the only way you can plan your business. Many companies go out of business because they signed massive enterprise deals that had awful payment terms and the company didn’t have enough cash in the bank to actually stay alive until they got their first payment. Defining cash timing rules changes that. You’ll be able to accurately and easily know when that elaborate enterprise contract will actually put money in your bank account vs on your books. Just because you closed a deal, doesn’t mean you’re on easy-street and can go hire a ton of people to do the work necessary. 

Cash timing will help you control every little in and out aspect of your business as it relates to cash so you can make sure you have the lifeblood of your business in good shape.

How revenue and expenses impact cash flow

Revenue and expenses are often thought of in the same vein but are drastically different in how businesses need to deal with them. Expenses can be a lot more complicated than revenue to plan and track and revenue is far from simple. Say you receive a contract for $1M over 2 years that is paid in 4 installments over the course of the 2-year contract. There are about 1,000 ways you can slice this up and, for that matter, mess it up in your financial planning and forecasting. Subscription companies like SaaS or professional services firms, often sign these contracts and have complicated payment terms. Sometimes they got several years of revenue upfront, other times it was in 60 days, or 90 days, or half now and half later, and the list goes on and on. This is a massive challenge that often means life or death for a small business.

Getting started figuring out cash timing for your business

The easiest way to start with cash timing is to create a Clockwork account, that’ll take you 2 minutes, and you can start building out your own cash timing rules. If you’re a SaaS company, a professional services firm, or any business that signs contracts with customers and doesn’t receive the cash the exact same day, Clockwork was made for you.  For someone to figure out cash timing manually and accurately, it would easily take them over 20 hours a month for a decently sized company but with Clockwork, it’s a matter of minutes augmented with the AI-powered automatic updates. 

No other forecasting and FP&A tool out there has this functionality. We just gave companies the ability to easily and accurately define how their expenses and revenue come in and actually affect their cash balance vs how they report on it. This is a huge step forward not only for fintech tools but for small businesses everywhere.

Read more about Intelligent Cash Timing Rules here.

Conclusion

Cash timing is how your revenue and expenses impact the cash you have access to at any given time. Here's how to figure out your business's unique cash timing.