There's usually a stretch of days between paying for your goods and being paid for them. That gap is where your cash lives — and if it's long, you can be profitable on paper and still empty before month end. Work out yours.
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Your cash gap is the number of days between paying for goods and collecting the money for them. It's worked out as: Cash gap = Days stock sits + Days work sits unbilled + Days customers take to pay − Days your suppliers give you.
Where each part is: Days stock sits = (Stock you hold ÷ Monthly cost of goods) × 30. Days unbilled = (Work done, not billed ÷ Monthly sales) × 30. Days customers take = (Money owed to you ÷ Monthly sales) × 30. Days suppliers give = (Money you owe them ÷ Monthly cost of goods) × 30.
Stock and supplier credit divide by cost, because both are measured at what you paid. Unbilled work and money owed divide by sales, because both are measured at what you'll charge. Mixing the two is the commonest way this calculation goes wrong.
A shorter gap means less of your own money is funding the business. A negative gap means your suppliers are funding it instead — the strongest position a small business can be in.
Your cash gap is a waiting time. It's the stretch between the moment money leaves your hands for stock and the moment it comes back from a customer. Everything you sell has to travel that distance, and while it's travelling, you're paying for it.
That's why the gap and the amount matter together. Thirteen days doesn't sound like much until you see that ₦250,000 of your money is out there for the whole thirteen — and that you'll need another ₦250,000 to keep trading while you wait.
A short gap means money comes back quickly. You can trade on less capital, survive a slow week, and take an opportunity when it appears. Most market traders and food businesses live here, and it's the reason they can operate on margins that would sink a bigger company.
A long gap means the business needs a lot of cash just to stand still. Growth makes it worse, not better: every extra sale is another sale you're funding. This is why businesses fail while their order book is growing.
A negative gap means you collect before you pay. Your suppliers are financing your trading. Very few small businesses manage it, and the ones that do should understand exactly which supplier relationships it rests on.
Profit and cash answer different questions. Profit asks whether the business earned more than it spent. Cash asks whether the money is here yet.
A sale becomes profit the moment it's made. It becomes cash when the customer actually pays. In between, the business is carrying it — and that gap is exactly what the calculator above measures.
In your stock. You paid for goods that haven't sold. On paper it's an asset. You can't pay rent with it, and if it's the wrong stock, you may never get the money back at full value.
With your customers. The sale is counted, the work is done, the money hasn't arrived. Every day of delay is a day you're funding someone else's business out of your own pocket.
In the timing of your bills. Suppliers want paying now, customers pay later. The month works out. The middle of it doesn't.
Almost every "busy but broke" month is one of those three, and the calculator will tell you which.
The cycle looks different when there's no stock on a shelf, but the trap is the same and often worse.
If you sell your time or a service, your money isn't stuck in stock — it's stuck in work you've done and haven't billed for. That period is invisible in most accounts and it is genuinely part of your cash gap. A consultant who works three weeks before sending an invoice and then waits thirty days to be paid has a fifty-one day gap, not a thirty-day one. Worse, service businesses rarely have supplier credit to offset it, so there's nothing on the other side of the subtraction.
The fix is usually the least glamorous one available: invoice sooner. Billing weekly rather than at the end of a job can cut a fifty-day gap to thirty without a single conversation about payment terms.
If you make things rather than buy and resell, your stock sits in three places, and they mean different things: Raw materials — buying too far ahead of what you can produce. Part-finished work — production is slow, or stalled waiting on one component. Finished goods — making ahead of confirmed orders.
The total gap is the same however you split it, but the fix isn't — cutting purchasing won't help a business whose money is stuck in half-built work.
One trap worth avoiding: your cost of goods should include the labour and power absorbed into what you make, not just materials. Enter materials alone and your stock will look like it sits far longer than it does.
1. Move stock faster, or hold less of it. This is usually the biggest single lever, and the one you control most directly. Every day you shorten how long stock sits is a day of your own money released. Look at what's actually slow rather than what feels slow: the lines you reorder out of habit, the bulk buy that saved 5% and trapped cash for two months, the season that's passed.
2. Get paid sooner. Not "chase harder" — agree the date in advance. Most small business credit isn't a decision, it's a drift: a regular customer who gradually stopped paying on the day. A stated payment date gives you something to chase against. Deposits on large or custom orders do the same job before the work starts.
3. Take longer to pay suppliers — carefully. Supplier credit is the one part of the cycle that works in your favour. Asking for terms is normal and often granted to reliable buyers. But this lever has a limit the other two don't: it spends goodwill, and a supplier who tightens terms at the wrong moment can turn a manageable gap into an emergency overnight.
Where to start. Whichever the calculator named as your biggest contributor. If stock and customers are close, take stock first — it's yours to decide, and it doesn't require a conversation with anyone.
A cash gap on its own tells you nothing about danger. What makes it dangerous is how it compares with your cushion.
Enter your cash on hand and your monthly running costs and the calculator shows both figures side by side: how long your money is trapped, and how long your cash covers your costs. That comparison is the point of the whole exercise.
If your cash covers less than your gap, you run out before your money comes back. This is the position that kills otherwise healthy businesses — not a bad month, but a normal month in which the timing simply doesn't work. The calculator tells you how much more you'd need in hand to bridge it.
If your cash just covers the gap, it works until something slips. One customer paying late, one quiet fortnight, one supplier asking for money sooner, and you're under.
If your cash comfortably exceeds the gap, you have room. That margin is what lets you take an opportunity rather than merely survive one.
A useful way to hold it: your runway should comfortably exceed your cash gap. Not equal it — exceed it, because the gap is an average and averages have bad weeks.
Note what runway measures that the gap does not. Rent, wages, power and your own pay never come back at all. They aren't part of the trading cycle, they simply drain. So the question for them is not how long they take to return, but how many days of them your cash can cover.
This shows where your money is trapped and which of the three causes is yours. It can't tell you whether cash is your most urgent problem, or whether something else deserves attention first.
The Business Health Check looks at your cash alongside your profit, how exposed you are to one big customer, and how much the business depends on you — then gives you a Business Health Score and the highest-impact thing to fix first.
Free. About 10 minutes. No accounting knowledge needed.
Ready to work on it? Monyvo keeps these numbers in front of you day to day — what you've sold, what you're owed, and what needs doing today. Free plan available.
Get the Monyvo appNot sure what to fix first? It looks at your profit, your cash, how exposed you are to one big customer, and how much the business depends on you — then tells you where to start.
Take your free Business Health CheckCash timing is one thing; whether the business actually keeps money once every cost is in is another. Find your real net margin.
Open the profit margin calculator →How much do you need to sell each day — including paying yourself — to cover everything, before cash timing even enters the picture?
Open the break-even calculator →