Cash Flow Problems: How to Diagnose and Fix the Causes

Key takeaways

• Diagnose the root causes of cash flow problems by mapping your client’s accounts receivable and accounts payable processes, not just reading the financial statements.
• Recognize that a timing gap between AR days and AP days can drain cash even when a business is profitable.
• Prescribe practical fixes like faster invoicing, clear payment terms, automated approvals, and one platform to manage inflows and outflows.
• Guide clients past the diagnosis by connecting the data to decisions and following up like a doctor with a patient.

Client complaint

“We are short on cash. We’re juggling too many disconnected tools to manage invoicing and collections. Invoices fall through the cracks, and no one knows who approved what. Our systems don’t talk to each other, and we end up chasing information we should already have.”

Diagnosis: finding the root causes

Just as a doctor gathers lifestyle, history, and genetic data before treating a patient, an advisor must consider the business’s full context. You need to gather information that goes beyond the numbers that end up on the financial statement. You must look for the root causes.

After further investigation and testing, you discover the information below.

Diagnosis: Cash flow is negative

Testing results: AR days = 90, AP days = 60, creating a timing crunch

Contributing factors: Underlying processes and systems don’t support business needs.

Symptoms: Disconnected billing, clogged workflows, limited payment options, reliance on manual W-9 and 1099 processes.

Why it matters: Cash is the lifeblood of any business. If payments are delayed, employees may not get paid, obligations can be missed, and trust begins to erode. Just like a regular heartbeat in the human body, steady and reliable cash flow is what keeps the system functioning.

We need to look at the underlying operating systems to begin taking corrective action.

Common cash flow problems and their root causes

Cash flow problems happen when the timing of money coming in does not match the money going out. The most common root causes sit in your accounts receivable and accounts payable processes. Even a profitable business can run short on cash when inflows lag behind outflows.

These are the patterns advisors see most often:

• Slow collections: Invoices go out late or reminders are inconsistent, so customers pay well past their terms.
• Mismatched timing: Money owed to vendors comes due before customer payments arrive, creating a squeeze.
• Disconnected tools: Billing, approvals, and accounting systems don’t talk to each other, so information falls through the cracks.
• Limited payment options: Customers can’t pay the way they want, which delays the moment cash lands in the account.
• Manual, unclear workflows: No one knows who approved what, and routine tasks depend on memory rather than a documented process.

Naming the pattern is the first step. The next is mapping where the friction lives so you can treat the cause, not just the symptom.

Operations: the heart of the issue

Operations drive cash flow. If cash is the heartbeat, operations are the muscle moving cash in and out of the business, through accounts receivable (inflows) and accounts payable (outflows). More often than not, the issue is not a single failure, but a breakdown in process flow.

As advisors, our first goal is to understand the business’s operational process, from how revenue is earned to how expenses are paid. Then we can diagnose where the arteries are blocked and determine what specific actions can restore healthy function.

Inflows: accounts receivable

Knowing that your AR days is currently 90 gives you clarity on the extent of the pain. But you have to dig deeper to identify the contributing factors.

Outflows: accounts payable

If cash is the heartbeat, then AP is the outflow valve. Just as uncontrolled bleeding is dangerous to the body, unmanaged or inefficient payables can sap a business’s strength, even when revenue is strong.

Knowing that AP days are sitting at 60, while AR days stretch to 90, gives you a starting point for your diagnosis. But you’ll need to look deeper to find the cause of the suffering.

Become the doctor, not just the diagnostician

As accountants, we often stop short of prescribing real solutions. But clients aren’t looking for a diagnosis—they want to feel better. We can guide them toward the right tools, streamline their operations, and most importantly, connect the data to the decisions they care about most.

Our job is to give them information they can understand so they can make better, more timely decisions. That means staying informed about their needs and about the tools and technology available to address today’s and tomorrow’s challenges.

Just like a doctor follows up with their patients, we must stay involved and help our clients make informed decisions that support the long-term health of their business.

Learn more about Melio’s AP and AR solutions for firms. Want to try it for yourself? Sign up to Melio for free.

Geni Whitehouse, CPA, is a winery consultant at Brotemarkle, Davis and Co in Napa Valley, where she helps business owners move beyond financial statements to address the operational and systems issues that drive cash flow and performance. She is the founder of The Impactful Advisor, a training platform focused on teaching accountants how to deliver meaningful advisory services that connect data to decisions. As a longtime educator and advisor, Geni is known for making complex topics practical, approachable, and actionable for both business owners and the professionals who serve them.

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