Profit without cash: Receivables, unpaid bills and stretched sales
How rising receivable days show sales turning into unpaid bills instead of cash, and how to spot it in a company’s numbers before it hits the share price.
Where did the money go?
| Measure | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Salesmoney from customers, ₹ crore | 700 | 840 | 1,010 | 1,210 | 1,450 |
| Net profitleft after interest and tax, ₹ crore | 70 | 84 | 101 | 121 | 145 |
| Cash from operationscash actually collected, ₹ crore | 66 | 60 | 45 | 22 | 8 |
| Receivable daysdays customers take to pay | 62 | 78 | 104 | 141 | 186 |
When profit grows but cash doesn’t, the money is usually stuck in unpaid customer bills. Receivable days tells you how long customers take to pay, on average.
What to look for
- Receivable days: steady is normal. Climbing every year is a warning.
- Rising receivables can mean customers in trouble, or sales booked a little too eagerly.
- Put receivable days next to cash from operations. They usually move in opposite directions.
Many accounting frauds started as “sales” to customers who never paid.
Receivable days went from 62 to 186. What does that mean?
- Customers now take about six months to pay, so sales are turning into IOUs, not cash
- The company is getting paid faster
- The company has 186 days of stock in its warehouse
Show the answer
Customers now take about six months to pay, so sales are turning into IOUs, not cash. Customers used to pay in about two months; now it takes six. Sales and profit look great, but the cash is sitting in other people’s pockets.
What the numbers showed
Receivable days tripled. The more slowly customers paid, the less of each year’s profit arrived as cash.
Many accounting frauds started as “sales” to customers who never paid.
Practise Profit without cash, free
Reading about it is step one. In MarketSeekho you look at a company’s numbers, make a call, say why, and get graded on your reasoning, not luck.
Common questions
What is Profit without cash?
When profit grows but cash doesn’t, the money is usually stuck in unpaid customer bills. Receivable days tells you how long customers take to pay, on average.
What should I look for in profit without cash?
Receivable days: steady is normal. Climbing every year is a warning. Rising receivables can mean customers in trouble, or sales booked a little too eagerly. Put receivable days next to cash from operations. They usually move in opposite directions.
Receivable days went from 62 to 186. What does that mean?
Customers now take about six months to pay, so sales are turning into IOUs, not cash. Customers used to pay in about two months; now it takes six. Sales and profit look great, but the cash is sitting in other people’s pockets.
How can I practise profit without cash for free?
MarketSeekho has a free four-page chapter on Profit without cash (learn, answer a question, spot it in a company’s numbers, then make a call) and an unlimited Spot the red flag practice game graded on your reasoning. No sign-up or money needed.