Cash flow tension despite profitability? The weak signals you should not ignore

A company can show positive results… while struggling to pay its bills.
This paradox is common among growing SMEs and subsidiaries in France, where good performance hides an unbalanced working capital (WCR).

Before liquidity issues escalate, several weak signals can reveal early cash flow deterioration.
Detecting them in time is key to protecting your financial health, investment capacity, and bank credibility.

Profitability ≠ liquidity: understanding the gap

A misaligned operating cycle

Working capital reflects the timing difference between cash inflows and outflows:

  • Excessive inventory,
  • Late customer payments,
  • Short supplier terms,
  • Unplanned growth.

👉 Even with a solid margin, these imbalances absorb cash and create financial stress.
In practice, the company is self-financing its operating cycle instead of generating liquidity through profits.

The illusion of accounting profit

The net result does not necessarily reflect available cash flow.
A company can be profitable on paper while depleting its cash position because of:

  • Investments not covered by operational cash flows,
  • Early dividend distributions,
  • Slow-paying customers,
  • Underestimated short-term financing needs.

Weak signals of deteriorating cash flow

1. Longer customer payment terms

When DSO (Days Sales Outstanding) extends beyond industry benchmarks, it signals liquidity risk.
Repeated reminders, overdue invoices, and fewer deposits are all signs of slower cash conversion.

2. Rising inventory levels

A growing inventory without equivalent sales increase usually means:

  • Overproduction or overstocking,
  • Returns or obsolete materials,
  • Slow turnover of goods.
    In short, too much cash locked in stock.

3. Increasing reliance on overdrafts

If your overdraft facility becomes permanent, it’s no longer a temporary fix but a warning sign:
structural cash inflows no longer cover the company’s operating needs.

4. Shorter supplier terms

When suppliers shorten payment deadlines or request advance payments, it shows eroding trust in your payment capacity — another symptom of tightening liquidity.

5. Delayed financial reporting

Late closings, inconsistent forecasts, or missing cash dashboards reveal weak financial control — a risk that often precedes cash flow breakdowns.

How to restore cash before a crisis

1. Monitor working capital in real time

Implementing a cash flow dashboard and working capital tracking by component (customers, inventory, suppliers) allows quick corrective actions:

  • Reduce DSO,
  • Optimize DPO,
  • Adjust stock levels.

An outsourced CFO (DAF externalisé) can help structure this monitoring with the right tools and methods.

2. Renegotiate payment conditions

Adjusting payment terms is a strong lever for improving cash position:

  • Negotiate longer supplier terms,
  • Request client advances,
  • Implement progress billing to smooth cash inflows.

3. Anticipate growth impacts

Growth always consumes cash before generating it.
A 12-month rolling cash forecast helps anticipate peak needs and secure an appropriate financing plan before issues arise.

The role of the outsourced CFO in early detection

An outsourced CFO acts as an early warning radar.
With a transversal view of profitability, cash flow, and financial structure, they:

  • Detect weak signals before they become emergencies,
  • Build cash flow forecasting tools,
  • Optimize short-term financing,
  • And promote a strong cash culture across the company.

Their role is both operational (cash forecasting, reporting) and strategic (bank relations, financing strategy, growth management).

Key takeaway

A cash flow issue is rarely sudden — it’s the visible result of a progressive working capital imbalance.
Identifying weak signals early prevents future crises and ensures the long-term financial sustainability of your business in France.

💡 Is your French subsidiary showing cash flow tension despite profitability?
KPI CONSEIL helps international companies analyze and optimize their working capital to secure lasting liquidity.
👉 Contact us today for a free cash flow health check of your French operations.