Revenue is Not Cash

By Heather Ogan

A CFO Guide to Working Capital Planning for 2027 

As companies begin planning for 2027, management teams will spend weeks debating revenue growth, gross margin, and earnings before interest, taxes, depreciation, and amortization (EBITDA). 

 These measures matter. But if the plan does not explain when revenue becomes cash, how working capital will be funded, and what management will do when assumptions miss, the plan is incomplete. 

The latest economic signals are mixed, which is precisely the point.  

The U.S. Bureau of Economic Analysis reported that real gross domestic product grew at a 1.5 percent annual rate in the second quarter, while real final sales to private domestic purchasers increased 4.2 percent. The August Consumer Price Index rose 3.4 percent from a year earlier, with energy prices up 16.3 percent even as inflation excluding food and energy moderated to 2.4 percent. 

The Federal Reserve’s September Beige Book describes modest economic growth, price-sensitive customers, and continuing pressure from energy, transportation, raw materials, tariffs, health care, and insurance. This is not a clear expansion story or a clear contraction story. It is an environment in which sloppy assumptions can become expensive very quickly. 

The CFO’s job is not to manufacture certainty where none exists. It is to translate uncertainty into cash requirements, decision thresholds, accountable owners, and actions. 

Growth Can Consume Cash 

One of the most persistent planning errors is assuming that revenue growth automatically improves liquidity. It may do the opposite. A company can report higher sales and stronger EBITDA while cash declines because customers pay more slowly, inventory builds ahead of demand, implementation costs occur before billing, or vendors require faster payment. 

A dollar of revenue is not equally valuable in every business model.  

Revenue collected in advance is different from revenue collected in 90 days. High-margin revenue with heavy onboarding costs is different from recurring revenue with low service requirements. Growth concentrated in one customer is different from diversified growth, even if the income statement looks the same. 

If I ask one question in a planning review, it is this: where is the cash? The answer should be visible in the model, not buried in a working-capital assumption that no operating leader can explain. 

Start With Revenue Quality 

A credible plan begins by separating the amount of revenue from the quality and timing of that revenue. Finance should work with sales, operations, and customer success to understand the economics beneath the top line. 

At a minimum, the 2027 plan should make the following assumptions explicit: 

• Billing timing, payment terms, and expected collection patterns by customer type 

• Renewal, churn, discounting, and customer concentration 

• Gross margin after implementation, support, returns, rebates, and channel costs 

• Inventory purchases, production lead times, minimum order commitments, and obsolescence risk 

• The timing of commissions, bonuses, taxes, capital expenditures, debt service, and other cash obligations 

This is where finance adds value. The goal is not to challenge every optimistic assumption simply because it is optimistic. The goal is to identify which assumptions drive cash, test whether they are operationally supported, and make the consequences visible. 

Make Working Capital Cross-Functional 

Finance may report working capital, but finance does not control it alone.  

Sales negotiates customer terms. Operations manages inventory and delivery. Procurement negotiates vendor terms. Customer success influences renewals and disputed invoices. Legal affects contracting speed and enforceability. When working capital is treated as a finance-only problem, accountability arrives too late. 

The answer is clear ownership.  

Each major driver should have a metric, an owner, a target, and a defined response when performance moves outside an acceptable range. 

• Accounts receivable: days sales outstanding, aging by risk category, billing accuracy, dispute resolution time, and collection commitments 

• Inventory: turns, aged inventory, forecast bias, purchase commitments, and stockout or obsolescence risk 

• Accounts payable: payment terms, vendor concentration, early-payment economics, and exceptions to policy 

• Cash forecasting: forecast accuracy, minimum liquidity, covenant headroom, and the timing of known large outflows 

The important point is behavioral. Metrics should drive a conversation and a decision. If an overdue receivable has appeared on the same report for three months without an owner or next action, the report is documenting the problem, not managing it. 

Translate the Budget Into Liquidity 

The income statement is only one part of the annual plan. CFOs should build a transparent bridge from EBITDA to cash that shows changes in receivables, inventory, payables, capital expenditures, taxes, interest, and one-time items. Management and the board should be able to see why reported profitability and cash generation differ. 

For businesses with meaningful volatility, the annual cash flow statement is not enough. A rolling 13-week cash forecast provides near-term operating visibility, while a monthly 12- to 18-month liquidity forecast shows when the company may need to adjust spending, raise capital, or access debt. These tools serve different purposes and should reconcile to the same underlying assumptions. 

The downside case also needs to be realistic. A 10 percent revenue reduction spread evenly across the year is easy to model and often operationally meaningless. 

 A useful downside case reflects how the business would actually experience pressure: a delayed launch, slower collections, customer loss, margin compression, excess inventory, or an unexpected cost increase. The model should then show the management actions available, how quickly they can be implemented, and what cash they preserve. 

Arrange Financing Before You Need It 

The Federal Reserve’s July 2026 bank lending survey found that commercial and industrial loan standards were broadly unchanged, while demand strengthened among large and middle-market companies. That is encouraging at the aggregate level, but it does not mean every borrower will receive the amount, structure, pricing, or covenant flexibility it wants. 

Companies should not wait for a cash constraint to begin preparing financing. A lender-ready company has timely financial statements, an explainable forecast, a clean borrowing-base calculation where relevant, clear covenant headroom, and a concise credit narrative. It can explain the difference between revenue and cash, not just point to growth. 

There is a practical reason to do this early: financing options narrow as urgency rises. A company negotiating from a position of adequate liquidity can compare structures and protect flexibility. A company negotiating against a payroll date is usually accepting terms rather than negotiating them. 

Turn the Plan Into Decisions 

A budget is a set of assumptions made at a point in time. It becomes an operating tool only when management defines how those assumptions will be monitored and what will happen when reality differs. 

Before approving the 2027 plan, the leadership team and board should be able to answer five questions: 

1. How much cash does the base plan generate or consume, and when?
2. Which three assumptions have the greatest effect on liquidity?
3. What is the minimum acceptable cash balance and covenant headroom?
4. What specific events trigger a hiring pause, spending reduction, pricing action, inventory change, or financing process?
5. Who owns each action, and how long will it take to produce a cash benefit?

These questions force the plan out of the spreadsheet and into management behavior. They also make monthly forecast updates more useful. The point is not to explain every variance after the fact. It is to recognize changes early enough to act. 

The Bottom Line: Converting Operating Decisions to Cash 

If the annual plan ends with EBITDA, it stops too soon. Profitability, growth, and liquidity are connected, but they are not interchangeable. Companies create resilience when they understand that distinction and manage it deliberately. 

No CFO can predict exactly what 2027 will bring. That is not the standard. The standard is whether the company understands how its operating decisions convert to cash, sees pressure early, and has agreed on what it will do next. That is the difference between a budget that reports expectations. 

Author Heather Ogan is the Administrative Managing Partner at FLG Partner. Connect with her directly to learn more about how FLG Partners can bring revenue solutions to your team.