Module 3
Cash flow and working capital: why profitable firms run out of money
A firm can be profitable and still go under. It happens like this: the firm wins work and does it, hires people to cope and pays them every month, and the clients’ money arrives two or three months after the work. The accounts show a profit and the bank account shows an overdraft. When the growth is fastest, the cash gap is widest, which is why growing firms fail more often than shrinking ones. This module explains the cycle from work to money, the measures that show how long it takes, how to forecast cash for the year ahead, what to do when a squeeze comes, and why a reserve is part of the price of doing business. You will practise with the Cash Forecast, a tool that shows month by month what happens to the free cash of an invented firm.
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See what is included in All-Access →General education on law-firm finance, using invented firms and figures. It is not accounting, tax, financial or legal advice. Rules on accounting, tax, client money, insurance and fees differ between countries and change: take advice from a qualified accountant and check your regulator’s current rules.
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