“Real AI tool beyond imagination.” — G2 reviewer of Ledge

Every task in your month-end close can now have its own AI agent. You describe the steps once in natural language, and Ledge turns that workflow into a custom agent that runs it end-to-end — across systems, spreadsheets, and your ERP.

Reconciliations, flux, workpapers, and journal entries are prepared automatically with full backup and evidence attached, then handed back for review and approval before auto-posting to your ERP.

Secret CFO readers who sign up for a demo in January get 20% off Ledge.

148 days.

That’s how long we had.

I’d joined a business as CFO with a nine-figure annual cash burn rate.

And I don’t mean the cool Silicon Valley kind… where anything goes as long as sales are growing fast enough and you repeat “AI” ad nauseam in the pitch deck.

This was a mature business, in a tough sector. No one was coming to save us.

It was steering an oil tanker heading for an iceberg. Far enough away that you could still see it coming. Close enough that there was no slipping past it. Only a full, violent course-correction would save us.

The good news? The problems were obvious:

The reporting failed to cut through the complexity of the business and bring clarity. The numbers told us cash was bleeding out, but they didn’t tell us exactly where.

The bad news?

Correcting that behavior at scale and at speed would be the challenge of a lifetime.

There was no equity check coming. No shortcut out.

There was only one path…the hard one.

We had to get the business to cashflow breakeven. Fast. We had to plug the holes in the bucket.

I’d wanted a big turnaround CFO role. And wow, had I picked one. The truth is, it would take months before I truly understood the full extent of what I’d taken on.

And the real fixes would take years of surgical work.

But we didn’t have the luxury of thinking in years. We had days. 148 of them.

Well…technically 147 now. It was 3 am. And for the third time that week, I’d woken up in a panic about how I was going to make payroll for thousands of people. Knowing it could have been me is the most visceral feeling I’ve ever experienced in business… being the person responsible for stopping thousands of families from putting food on the table. It stays with you.

I knew how much cash we had, and I knew how fast we were burning. I also knew we had nowhere to go if we couldn’t stop the bleeding.

I was working with a CEO who was brilliant and an exceptional strategist, but not someone used to the dark arts of hand-to-hand cashflow combat. He, along with the board, staff, customers, and suppliers, was depending on me to drag the business out of the hole.

The art was in finding the balance: short-term actions to buy runway, while fixing the deeper issues at the source. Knowing what should be bandaged, what needed reconstructive surgery, and when.

I thought I understood cashflow.

But it was only when so much depended on it - inside a complex organization, under extreme urgency - that I truly learned how cash actually flows through a business. And, crucially, how to connect operational actions to real cashflow improvements.

We had to fix the underlying economics of the business. And not just for the P&L, but for cashflow. We were so close to the edge we couldn’t afford a one-off restructuring hit. Or a sloppy working capital move going the wrong way.

Then we had to execute and fix the leakage. As if that wasn’t hard enough, we’d also have to keep enough CapEx and R&D flowing to make sure there was a business worth saving at the end. A fine balance of burning the furniture to stay warm, without setting fire to the house, indeed.

The months and years that followed became the most valuable learning experience of my career. The full turnaround story is for another day. 

But even with a full P&L turnaround, we still needed a one-off release of working capital, and then a fundamental reset of the business’s long-term cash economics.

And while those were the headlines, in practice, the execution spanned every department and every location.

Just thousands of small steps, all in the same direction, up a very large mountain.

Welcome to a new year of The Secret CFO’s Playbook, and a new series: Cashflow Mastery 2.0.

Why 2.0?

We covered cashflow in an eight-part series over two years ago. That work focused on the fundamentals CFOs need to survive: forecasting, working capital, and tactical actions to drive cash.

This series will revisit some of those foundations, but go much deeper.

Cashflow Mastery 2.0 is about strategic cash management. How cash really moves through a complex business. How decisions compound. And how CFOs use cashflow as the most powerful weapon in business.

In the first cashflow series, I described the difference between cash and cashflow using a bucket.

Imagine cash as the water level in the bucket and cashflow as the rate at which the bucket fills or empties.

It’s a useful starting point, but this analogy breaks quickly. It assumes all cashflow is the same. It isn’t. Cashflow invested for growth is not the same as cash leaking out through inefficiency. And cashflow in a real business doesn’t behave like a single pipe in or out.

It’s more like a complex tangle of pipes with gauges, valves, water flowing at different rates; some fast, some leaking.

But what we are really trying to do is to get cashflow to behave like this:

Power the business with the minimum force necessary, so cash travels further and can be used to fuel bigger machines.

Defining the different types of cashflow is critical.

Why?

Because where cashflow is generated and controlled inside the business matters just as much as how much of it you have.

Cashflow doesn’t sit in one place. It’s generated, and wasted, by dozens of decisions made across the organization. Which is why attributing cashflow drivers (and the right metrics) to the right departments and individuals is essential.

There are, after all, many hands in the cashflow pie.     

At a corporate level, they generate roughly ~$9bn of operating cashflow per year.

Very roughly, around 30% goes into CapEx, with the remainder returned to shareholders through dividends and buybacks.

Those broad allocations are set at the board level, via a longstanding financial policy.

But those are just the headlines. After that, it gets complex fast.

Is that CapEx kitchen upgrades? Drive-through expansion? Digital ordering? New restaurants? And then which geographies? Which formats?

Each decision has a different return profile. Different working capital cycles. Different cash consequences.

And those decisions are distributed deep into the organization.

The same is true on the way in.

That ~$9bn of operating cashflow doesn’t arrive in one lump. It arrives one $4 hamburger at a time, delivered by 2m+ global McDonald's employees.

On a reported top line of ~$25bn. Or closer to $130bn of system-wide sales when you look at the full McDonald’s franchise system.

At that scale, small changes compound brutally.

Plus or minus a few days of payment terms with beef suppliers? That’s not a rounding error. It could be measured in billions.

Same if there’s a subtle mix shift from burgers to milkshakes. Or a popular new meal deal that adds Chicken McNuggets to a meal deal.

Each of these operational decisions made for good commercial reasons could have a wild effect on cashflow, so understanding the cashflow impact through the same lens of the decision is vital.

Most businesses make decisions like these through a P&L lens, and then simply end up explaining the cashflow impact in retrospect once their management accounts throws out a variance they weren’t expecting.

In short, you need a system for managing cashflow decisions.

Some cashflow decisions are chess moves; mechanical, repeatable, rules-based. There is an optimal choice given the information available - a calculable trade-off. For example, offering an early payment settlement discount to customers. This math is easy; the only unknown is the uptake rate.

Others are poker bets; probabilistic and uncertain asymmetric outcomes, informed by judgment, not certainty. For example, launching a new commercial offer - a revised price pack, bundle, or contract structure - where uptake, customer behavior, competitive response, and downstream cash impacts can’t be known in advance, only assessed and sized as a risk.

Great cashflow management is knowing which decisions belong in which bucket. And setting the business up to make them without having to ‘run it through finance’ on every last decision.

Here’s the mental model we’ll come back to throughout this series: the Cashflow Megaphone:

Changes in business economics oftentimes hit cashflow harder than profit. Sometimes by an order of magnitude.

Whisper a profit impact into one end of the megaphone… and a cashflow impact screams out the other side. 

Imagine a business with $5m of revenue & $500k of EBIT.

In round numbers:

That’s $190k of weekly cash transactions to generate $10k of profit.

A ratio of 19:1.

A small shift in the timing of those cash flows could wipe out—or double—that profit in cash terms in a heartbeat. And the operational change behind it could look completely innocuous. Something as mundane as switching a warehouse supplier. Or a new customer contract. Or even if a key customer goes payment awol for a week or two.

Back to poker and chess.

As a CFO, you generally want to give the business as much room as possible to be able to make poker bets. That’s where breakout change and value creation come from.

But the more a decision carries the cashflow megaphone effect, the more it needs to be treated like chess.

Deliberate. Structured. And tightly controlled.

At the center of all of this is understanding the cashflow economics of your business.

Most cashflow management conversations talk about the components of cashflow in isolation, organized around their GAAP treatment.

For example: “If we reduce inventory by one week of stockholding, we generate $1m of cashflow.”

That framing isn’t useless. It’s a powerful simplification when you’re dealing with a clear execution or efficiency problem. I used exactly that logic in the early days of the cashflow recovery plan from the opening story.

But once you’re through those obvious execution issues, it becomes a very limited frame. It’s not how real cashflow decisions are designed or sustained.

Most paths to a one-week inventory reduction come with trade-offs and second-order effects. For example:

And then there’s the deeper issue of cause and effect—what the actual decision point is. Many of the impacts above don’t stem from “inventory reduction decisions” at all. They stem from upstream choices in operations, commercial strategy, and supply-chain design.

That’s why thinking about cashflow purely through an accounting lens is very limited. Yet so many manage it exactly this way!

The point is this:

Cashflow design decisions don’t happen in neat accounting buckets.

They happen at the driver level - in operations, commercial terms, supply chain design, and product strategy. That’s how they need to be understood, modeled, and owned internally.

It still stuns me how many CFOs let decades-old GAAP classifications dictate how they run their businesses day to day. Yes, external reporting has to follow GAAP-mandated headers. But internal reporting should reflect how the business is actually managed and how cash really flows through it. 

A small dose of first-principles thinking leads you to a very different, and far more useful, way of unpacking cashflow than GAAP would lead you to...

Maintainable Free Cashflow 2.0

So, we won’t be looking at cashflow by component (EBITDA, working capital, Capex, etc), because that isn’t how cash flows through a business. 

Which brings me to our old friend…Maintainable Free Cashflow. I’ve had a couple of years more experience and thinking time since I first fired this concept into the world, and it’s due for a facelift.

You’ll hear about it next week.

So what is in store in this series?

The CFO is the custodian of cashflow for the business.

That doesn’t mean being a permanent “no” merchant (although sometimes it does). 

It means being a sophisticated capital manager - one who looks well beyond traditional accounting definitions and cashflow buckets.

The most interesting cashflow opportunities don’t sit in a red box on a weekly working capital report. They sit in a deeper understanding of how cash actually moves through the business.

And the most powerful tool for that is Maintainable Free Cashflow, which is where we’ll go next week.

:::::::::::::::::::::::::::::::::::::::::::::::::::
:: Thank you to our sponsor ::
:: Ledge ::
:::::::::::::::::::::::::::::::::::::::::::::::::::

If you enjoyed today’s content, don’t forget to subscribe.

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.