Cash Flow Metrics Every CFO Should Track

Beyond Basics: Cash Flow Metrics That Drive Decisions

Most business leaders track their cash balance and perhaps their monthly burn rate. While necessary starting points, these provide limited insight into the underlying health and trajectory of your cash flow. A comprehensive metrics framework reveals not just where you are but where you are heading and why.

Essential Cash Flow Metrics Reference

Metric	Formula	Healthy Range
Operating Cash Flow Ratio	OCF / Current Liabilities	Above 1.0
Free Cash Flow	OCF - Capital Expenditures	Positive (mature companies)
Cash Conversion Cycle	DIO + DSO - DPO	Lower is better
Days Sales Outstanding	(AR / Credit Sales) x Days	Close to payment terms
Cash Flow Coverage	OCF / Total Debt Service	Above 1.2
Working Capital Ratio	Current Assets / Current Liabilities	1.5 to 2.0
Cash Flow to Revenue	OCF / Revenue	Stable or growing

Deep Dive: Critical Metrics

Operating Cash Flow Ratio

This ratio compares cash from operations to current liabilities. A ratio above 1.0 means operations generate enough cash to cover short-term obligations. Track monthly and watch for declining trends, even if the ratio remains above 1.0.

Free Cash Flow (FCF)

Free Cash Flow equals operating cash flow minus capital expenditures. It represents cash available for debt repayment, dividends, acquisitions, or reinvestment after maintaining your asset base. FCF is often considered the most important measure of financial health.

Cash Conversion Cycle (CCC)

CCC measures how quickly your business converts investments back into cash: Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding. A shorter CCC means faster cash generation. Comparing your CCC to industry benchmarks identifies improvement areas.

Days Sales Outstanding (DSO)

DSO measures the average days to collect payment after a sale. Rising DSO means customers are paying more slowly. Monitor DSO by customer segment to identify which groups are slowing collections.

Cash Burn Rate and Runway

For companies spending more than they generate, burn rate and runway are critical. Burn rate is net cash consumed per month. Runway is total cash divided by monthly burn, expressed in months. Track burn rate weekly during critical periods.

Key Takeaway: These metrics are most valuable when tracked together on a single dashboard, reviewed weekly, and trended over time. Individual metrics in isolation can be misleading — a complete view reveals emerging issues before they become crises.

Cash Flow to Revenue Ratio

OCF / Revenue shows what percentage of each revenue dollar converts to actual cash. A declining ratio suggests revenue growth is not translating into proportional cash generation — indicating problems with pricing, costs, or collection efficiency.

Building a Metrics Dashboard

Finntree automatically calculates many of these metrics from your transaction data, providing a real-time dashboard that eliminates manual calculation. For guidance on building effective dashboards, see our article on financial dashboards that work, and learn about AI-powered KPI tracking for automated insights.