What is cashflow?
Cashflow is the difference between profit on paper and money in the bank. An agency can sign a large project, be profitable on every line of it and still be unable to make payroll in March, because the invoice is not due until April and the crew was paid in February. Cashflow is the timing of the money: when it comes in, when it goes out, and how much is on hand at every point in between.
It is tracked as cash in (client payments, deposits) against cash out (salaries, rent, crew, suppliers, tax) over weeks and months, and the result is either positive, with the balance growing, or negative, with the agency living off its reserves or its credit line. Accountants split it further into operating, investing and financing cashflow; for most agencies the operating line, the money from doing the work, is the one that decides everything.
Why it matters
Why cashflow matters
Agencies rarely fail because they are unprofitable. They fail because they run out of cash while they are profitable: a big client pays at ninety days, two productions are paid up front by the agency, and a quiet quarter lands at the same time. Production businesses are especially exposed, because the money goes out to crews, locations and equipment long before it comes back in from the client. Watching cashflow is what lets an agency say yes to a large job without betting the company on the client's accounts payable department.
It is also a negotiating position. An agency with cash can hold its price, wait for the right work and turn down a bad deal. One without it takes whatever pays this month.
In practice
How cashflow works in practice
- 01
The basic tool is a cashflow forecast: a spreadsheet or a report that lists expected cash in and cash out by week for the next three months, starting from today's bank balance. Client invoices go in on the date they are likely to be paid, not the date they are due. Payroll, rent and known supplier bills go out on their real dates. The running balance at the bottom shows where the pinch points are before they arrive.
- 02
Then the agency manages the timing. Deposits and milestone invoices pull cash in earlier; agreed payment terms with suppliers push cash out later; a credit line covers a gap the forecast has already shown. A monthly review against what actually happened keeps the forecast honest.
Watch out
What people get wrong about cashflow
Confusing it with profit. A great month on the profit and loss statement can be a terrible month for cash if the invoices have not been paid yet, and the reverse is just as common. The other mistake is forecasting from invoice due dates rather than from how each client actually pays. A client who always pays at sixty days should be in the forecast at sixty days, whatever the terms say.
And the simplest one: not asking for a deposit. The fastest fix for agency cashflow is to stop financing the client's production.
