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WELCOME TO ISSUE NO #073
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📆 Today’s Rundown
Hey {{first_name}} 👋, hope you had a great week! In the last issue, we discussed why tracking Capital Efficiency matters, and now we are moving with the next topic from Financial Metrics content.
Let’s talk about ⬇️
Cash inflows and outflows
Most founders check their bank balance and assume they understand their cash flow.
They don't.
After working with SaaS finance teams at every growth stage, I've seen the same blind spot over and over: leaders track the total, but miss the breakdown — and that's exactly where the real problems hide.
So today, I want to walk you through the 3 types of cash flow every SaaS operator needs to understand — and why confusing them is quietly killing your runway.
Let's dig in:
TL;DR
1️⃣ Operating Cash Flow
2️⃣ Investing Cash Flow
3️⃣ Financing Cash Flow
4️⃣ Putting it all together
1️⃣ Operating Cash Flow
This is the one everyone thinks they understand — but rarely do in full.
Operating cash flow covers everything tied to your core business: subscription revenue coming in, payroll going out, software costs, rent, and day-to-day expenses.
Why it matters: It's the clearest signal of whether your business model actually works. Positive operating cash flow means your product is paying for itself. Negative means it isn't — and no amount of fundraising fixes a broken unit economy forever.
On the inflow side, operating revenue looks straightforward — but there are sources founders often overlook:
Customer prepayments: If a customer pays upfront for an annual contract, that cash hits your account immediately — long before you've delivered the full service. This is one of the most underrated levers for improving short-term liquidity in SaaS.
Royalties and licensing fees: If you've built proprietary technology or IP, licensing it to third parties creates a recurring inflow that requires no additional headcount or inventory.
Government grants and subsidies: Depending on your industry or location, non-dilutive grant funding can be a meaningful inflow — and one that requires zero repayment.
On the outflow side, the two biggest variables to watch are:
Headcount. Payroll is the single largest cash outflow for almost every SaaS company. As you scale, it grows faster than almost any other expense line — and it's the hardest to reverse quickly if things go sideways.
Sales and marketing spend. Ramping CAC is necessary for growth, but it creates an immediate outflow before the revenue it generates ever materializes. Your cash flow analysis needs to account for both the short-term hit and the long-term payback.
The bottom line: If your operating cash flow is consistently negative and it's not by deliberate design, that's not a fundraising problem — it's a business model problem.
2️⃣ Investing Cash Flow
This section of your cash flow statement will almost always look negative — and that's completely fine.
Investing activities include equipment purchases, capitalized software development costs, and any long-term asset acquisition. Cash is leaving your business in exchange for something that should generate future value.
Common outflows here include:
Capital expenditures (CapEx): Investments in new technology, machinery, or infrastructure. These reduce liquidity now but expand your capacity and efficiency over time.
Capitalized software development: If your engineers are building internal tools or product features, a portion of those costs can be capitalized — meaning they show up as investing outflows rather than operating expenses.
Equipment and facility upgrades: Laptops, office infrastructure, hardware — anything that supports your team's ability to operate and grow.
Why it matters: Investing cash flow tells investors and leadership whether you're building for the long term or just surviving quarter to quarter.
A company with zero investing outflows isn't necessarily efficient — it might just be standing still.
Watch closely: the relationship between what you're spending and the capability it's creating. $20K in capitalized product development is a fundamentally different decision than $20K on depreciating office furniture. Both show up as outflows. Only one compounds.
Need clarity on your financial strategy or cash flow optimization?
I'm Aleksandar, fractional CFO at Fiscallion, where we help founders like you achieve financial clarity, streamline reporting, and build investor-ready forecasts.
Ready to level up your finances?
3️⃣ Financing Cash Flow
This is where funding rounds, loan repayments, equity sales, and dividends live.
Cash inflows in this category include new capital raised — whether that's a seed round, Series A, or a business loan. Outflows include debt repayment, principal payments on existing loans, and any dividends returned to shareholders.
One nuance worth flagging: interest payments are recorded as an operating activity, not financing. It's a detail that catches a lot of early-stage finance teams off guard — and it means your operating cash flow picture looks worse than it might on the surface.
Why it matters: Financing cash flow shows how dependent your business is on outside capital to stay functional. Early on, heavy reliance on financing is expected and normal. But over time, the goal is for operating cash flow to carry more of the weight.
When operating cash flow starts to cover your investing needs without requiring constant financing inflows, that's when you know the business is maturing.
Watch closely: the trend over time. Are you raising to grow, or raising to survive? Investors can tell the difference — and so can your cash flow statement.
4️⃣ Putting it all together
Here's the simplest way to think about all three:
Operating = Is your core business self-sustaining?
Investing = Are you building something valuable for the future?
Financing = How much are you relying on outside money to bridge the gap?
A healthy SaaS business over time looks like this: strong positive operating cash flow, deliberate investing outflows tied to growth, and declining dependence on financing activity to keep the lights on.
If your numbers don't tell that story yet, that's not a failure — it's a roadmap.
The companies that win long-term aren't the ones that raised the most. They're the ones that understood exactly where their cash was going, and made smarter decisions as a result.
That's the difference between reacting to cash problems and preventing them entirely.
Hit reply and tell me: which of the three cash flow categories do you find hardest to manage right now? I read every single response — and I'd love to hear where your team is feeling the most pressure.
Chat soon,
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Alex Stojanovic
Chief Finance Ninja | Fiscallion
Fractional CFO & FP&A Boutique Consultancy
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