The Series A Finance Ops Cash Conversion Problem

# The Series A Finance Ops Cash Conversion Problem: Why Revenue Growth Doesn't Equal Cash Growth

You just closed Series A. The funding hit your bank account. Your board is excited. Your team is hiring. Everything feels like momentum.

Then, six months later, your CFO (whether that's you or a new hire) drops a reality bomb in a board meeting: "We're growing revenue 200%, but our cash position relative to revenue is actually declining."

This isn't a survival problem yet—your runway is fine. But it's a *symptom* of a finance ops problem that will become critical if you don't fix it now.

In our work with Series A startups, we've seen this pattern repeatedly: companies that nail product-market fit and land initial enterprise customers often have terrible cash conversion efficiency buried underneath their impressive top-line numbers. The finance operations infrastructure required to *capture* that cash—invoice on time, collect on terms, manage working capital, forecast cash flow accurately—gets treated as an afterthought until it's a crisis.

This article isn't about compliance checklists or whether you should buy NetSuite. It's about the specific cash conversion operations gap that emerges at Series A and how to build finance ops that actually convert revenue into cash.

## What Is the Cash Conversion Problem at Series A?

Cash conversion in finance ops means: how long does it take for revenue you've earned to actually appear in your bank account as usable cash?

At seed stage, this is invisible. You're selling annual contracts to 5-10 customers, collecting upfront or net-30, with minimal payment friction. Your cash and revenue are nearly synchronized.

Series A is where this breaks.

Now you have:

- **Multiple customer segments** with different payment terms (net-30 for SMBs, net-60 for mid-market, net-90 for enterprise)
- **Larger deal sizes** where customers want net-60 or net-90 terms as a negotiation point
- **Expansion revenue** from existing customers that doesn't align with your invoice schedule
- **More complex billing cycles** (annual contracts with monthly usage billings, seat-based pricing with variable headcount, consumption models)
- **Payment processing failures** that weren't significant when you had 10 customers but compound when you have 200

The result: Your revenue recognition statement shows $2M ARR, but your cash runway calculation is based on money that won't arrive for 45-90 days.

We worked with a B2B SaaS company that had just closed Series A with $1.2M in the bank. They reported $400K MRR and were celebrating 150% growth. But their accounts receivable aging showed $220K outstanding beyond terms. Their actual cash position was equivalent to 2.8 months of burn instead of the 3.6 months they thought they had.

They found out when they tried to make payroll and realized they couldn't pay their AWS bill on the same day.

## The Finance Ops Gaps That Create Cash Conversion Friction

Cash conversion breaks down at three layers in your finance ops:

### 1. Billing and Invoicing Discipline

Most founders assume billing is solved once you pick a billing platform (Zuora, Recurly, Stripe). It's not.

The problem: Your billing system reflects what *should* happen based on your contracts, but your actual operations are messier. You have:

- Customers who should renew on date X but haven't confirmed the renewal
- Annual contracts with net-90 terms where you invoice 90 days before the service period starts (working capital hole)
- Usage-based customers where you're billing lag (usage happens in month 1, you invoice in month 2, they pay in month 3)
- Manual adjustments for deals your sales team made ("free month," discount, extended trial) that haven't been communicated to finance

At Series A, you need a monthly billing audit process. This isn't accounting—it's operations. Someone (ideally a finance ops person, not your accountant) needs to review:

- What got invoiced this month vs. what should have been invoiced
- What invoices are still outstanding and why
- What manual adjustments happened and whether they're recorded
- Whether your billing system matches your contracts

We had a portfolio company that discovered their billing system had been sending monthly invoices to a customer for an annual contract. The customer had been paying monthly, creating 12 separate receivables instead of 1. When that customer wanted to consolidate to a single annual invoice (as part of a renewal), it created a $90K timing gap in cash flow that nearly tanked their Q3 forecast.

The fix was a one-time audit. The lesson: billing discipline scales.

### 2. Accounts Receivable Management Infrastructure

Once you have 50+ customers, someone needs to actively manage receivables. Not to be aggressive, but to be *systematic*.

Your finance ops should include:

**Aging analysis and escalation protocol**: A weekly view of what's outstanding, bucketed by days overdue (0-30, 31-60, 61-90, 90+). For anything beyond terms, there's an escalation protocol: first email (day 35), second email (day 45), CFO/sales involvement (day 60), potential hold on renewal (day 75).

**Payment method failures**: Your payment processor will fail to collect on a certain percentage of auto-renewals. You need a reconciliation process that catches these within 5-7 days, not 30. One company we worked with had a 15% failure rate on credit card collections and wasn't catching them for 45 days. They were sitting on $30K of failed payments while thinking the money was coming.

**Dispute and refund tracking**: As you grow, you'll have legitimate disputes (billing errors, service issues). You need a clear process for how these are recorded, when they're reversed in the revenue ledger, and how they flow to cash. Without this, your accounts receivable balance sheet item becomes a mystery box.

### 3. Working Capital Planning

This is where most founders' eyes glaze over, but it's the operational decision that most directly impacts cash runway.

Working capital = money stuck in your business cycle that isn't yet cash.

For a SaaS business, this is primarily accounts receivable (money owed to you) and deferred revenue (money you owe service for). The balance between these two determines whether you're in a cash-positive or cash-negative working capital position.

Example:
- You have $500K in accounts receivable (customers who owe you money, mostly net-60/90)
- You have $200K in deferred revenue (annual contracts paid upfront, revenue recognized monthly)
- Your working capital position is negative $300K (you're using $300K of cash to bridge the gap between cash outflows for costs and cash inflows from customers)

At Series A, you need to model this explicitly in your cash flow forecast. Not your revenue forecast—your **cash flow** forecast. [The Cash Flow Timing Gap: Why Founders Miss Payment Deadlines](/blog/the-cash-flow-timing-gap-why-founders-miss-payment-deadlines/)

The operational decision: should you be aggressive about negotiating shorter payment terms, or is the working capital cost acceptable given the deal velocity you're winning?

We worked with a company that was on track to lose the working capital game. They were signing net-90 customers as a competitive advantage, but they were also on net-30 vendor terms with their biggest operational expense (data infrastructure). They were burning through cash at a 60-day cycle. In cash flow terms, they had 60 days of cash that was entirely trapped in the working capital gap.

The fix wasn't changing all their customer terms (that would have killed deal flow). It was negotiating extended payment terms with their vendor and restructuring one customer cohort to net-60. This moved the needle on cash runway by 2 months.

## Building Series A Finance Ops for Cash Conversion

Here's what "Series A finance ops done right" looks like from a cash conversion perspective:

### The Monthly Cash Conversion Audit

Every month, someone on your finance ops team (or your fractional CFO, if you don't have one yet) should produce a one-page report showing:

- Revenue recognized this month: $XXX
- Cash collected this month: $XXX
- Gap (timing difference): $XXX
- Days sales outstanding (DSO): XX days
- Accounts receivable aging by bucket
- Any revenue adjustments (refunds, disputes, write-offs) and their cash impact

This is not your P&L. This is not your balance sheet. This is an operations dashboard.

Why? Because it forces you to close the loop between the accounting record (revenue) and the operational reality (cash). If these numbers are diverging, you know your billing or collections process has a leak.

### The Working Capital Forecast

When you plan for the next 12-18 months, you need two forecasts, not one:

1. **Revenue forecast** (for your board, for strategic planning)
2. **Cash flow forecast** (for your CFO, for decisions about hiring, vendor terms, and runway)

The difference between these is working capital. [The Cash Flow Visibility Gap: Why Founders Manage By Surprise](/blog/the-cash-flow-visibility-gap-why-founders-manage-by-surprise/)

Your working capital forecast should explicitly model:
- Customer payment term mix (what percentage of your revenue is net-30 vs. net-60 vs. net-90)
- Seasonal or timing patterns in your business (do certain months have more renewals or expansion?)
- Your vendor payment terms
- The cash impact of these timing mismatches

One client we work with discovered that their biggest cash flow volatility wasn't from revenue churn—it was from lumpiness in their annual contract renewals. Because 40% of their ARR renewed in Q1, they had a massive AR spike in Q4 (when they were invoicing). Their cash runway calculation needed to account for this seasonal working capital swing.

### The Billing System Audit Protocol

Quarterly (or at minimum semi-annually at Series A), you need a billing audit where you test:

- Do 10 randomly selected customers have invoices that match their signed contracts?
- Are there manual adjustments in your billing system that aren't documented anywhere else?
- Are there failed payments or failed renewals sitting in your system for more than 5 days?
- Does your deferred revenue balance match what you expect given your contract terms?

This is operational verification. It doesn't require an accountant—it requires someone who understands your business and can reconcile contracts to bills.

## The Role of Finance Ops Infrastructure in Cash Conversion

Tools matter less than process, but the right tools make process sustainable.

At Series A, you should have:

- **A billing system** (Zuora, Recurly, Stripe Billing) that's configured to your actual contract terms, not the default
- **An accounts receivable tracking system** (could be a spreadsheet if you have <100 customers, should be integrated into your accounting system if you have >100)
- **A cash flow forecasting tool** [Startup Financial Models That Actually Drive Decisions](/blog/startup-financial-models-that-actually-drive-decisions/) that's connected to your actual billing data

The most common mistake: founders buy sophisticated tools (NetSuite, Workday) when they actually need to fix their process first. The system won't save you if your billing process is broken.

We had a client that went live with Zuora before they had actually defined their billing rules. For three months, the system was sending correct invoices for the wrong contract structures because the billing configuration didn't match reality. They had to shut it down and go back to a spreadsheet.

## Why This Matters for Series A Success

Cash conversion efficiency doesn't make your product better. It doesn't win you customers. But it fundamentally changes your financial runway and your decision-making flexibility.

Here's what we mean: A company with strong cash conversion discipline has more financial flexibility. They can negotiate longer vendor terms because they understand their working capital position. They can be more aggressive about winning customers on net-90 terms because they know the math. They can forecast with confidence because they're not surprised by cash timing.

A company without this ops infrastructure is flying blind. Their cash runway calculation is "hopeful." Their payroll dates are stressful. Their vendor negotiations are weak because they don't actually know when money is coming in.

At Series A, you have enough complexity that manual cash management breaks. You have enough cash that you can afford to build proper finance ops. And you have enough time before Series B that fixing these gaps won't feel like a fire drill.

The companies that get this right at Series A are the ones that scale without constantly hitting cash crises. They're the ones who can make long-term hiring decisions confidently. They're the ones who can negotiate from a position of financial clarity.

## Next Steps: Cash Conversion for Your Series A Company

If you're in Series A right now, this is the moment to build these ops before they become problems:

1. **Run a one-time audit of your cash conversion**: Compare your revenue for the last three months to cash collected. Calculate your days sales outstanding (DSO). Look at your accounts receivable aging.

2. **Map your customer payment term mix**: What percentage of your revenue is net-30, net-60, net-90? What's the trend as you move upmarket?

3. **Reconcile your billing system to your contracts**: Pull a sample of 10 contracts and verify they're being billed correctly.

4. **Build a working capital model**: Project your accounts receivable and deferred revenue for the next 12 months based on your revenue forecast.

If you want help structuring this audit or building a sustainable finance ops foundation for cash conversion, Inflection CFO offers a free financial operations assessment for Series A companies. We'll run a cash conversion audit, identify your specific ops gaps, and give you a roadmap for fixing them before they become runway threats.

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