Why I Created SLOS — Part 5: Where Did the Cash Actually Come From?

The board was ready to celebrate. Then the CEO asked one simple question. Tom is CFO of a company called Growth. This year, Growth had every reason to celebrate: 20% revenue growth year-on-year, positive EBITDA, positive net profit, and £2 million sitting in the bank. The financial statements told a growth story, and the board was ready to talk about it — bonuses, dividends, the works. Marketing already had the celebration planned. Then CEO Chris asked one question: "Where did the cash come from?" Tom looked at his own financial statements and hesitated. He didn't have the answer. "I don't have the figures on me," he told Chris. "I'll send them over tomorrow." As soon as he left the boardroom, Tom called Maya, the company's Treasurer. "Maya, I need a favour. We had £2 million in the bank on 31 December. I need to know where it came from — first thing tomorrow morning." "Leave it with me," Maya said. "You'll have it in your inbox by end of day." She kept her word. Hi Tom, I've done a thorough analysis of our £2 million cash balance. Early this year we borrowed £1 million to fund working capital. We earned £500,000 from FX hedging gains. Interest rates were high, and because we hold substantial client money, we earned £500,000 in interest income. And we delayed £1 million in tax payments to HMRC — the board wanted the cash available for the planned dividend. Let me know if you have any questions. Maya Tom read the email at 8am the next morning, and his heart sank. Every pound of that £2 million had an explanation. None of them was the one he'd hoped for. To answer the board properly this time, Tom asked himself a harder question: how repeatable, controllable, and sustainable is each of these sources? He wrote up his findings for the board pack. £1 million was borrowing. It comes with a cost — interest, fees — and it isn't sustainable. £500,000 was an FX gain from hedging. Hedging itself is legitimate risk management — its purpose is to protect the business from FX and interest rate movements, not to speculate on them. But a favourable gain is still just that: favourable. What moved in Growth's favour this year could just as easily move against it next. £500,000 was interest income on client money and company savings. Interest rates fluctuate, and no individual business controls them. That income can shrink the moment policy turns — the Bank of England cuts rates, HMRC changes the tax treatment, or clients simply start asking for a larger share of it themselves. £1 million was tax, not paid, but owed. Delaying a payment doesn't make it disappear. It still has to be settled, and delaying it to fund a dividend doesn't change that — it just moves the reckoning later. Add it up, and one number was left standing: cash generated by Growth's own operations was negative £1 million. The business hadn't earned its way to £2 million. It had borrowed, hedged, and delayed its way there. Its own operating engine was burning cash, not producing it. This is one of the reasons I created SLOS. Cash management cannot stop at the closing balance. It needs to ask three questions: Cash position — how much cash do we have? Cash source — where did it come from? Cash quality — how repeatable, controllable, and sustainable is that source? That is where cash intelligence becomes different from simply looking at a bank balance. Growth is a simple example, but the real business world is rarely this tidy. It's normal for a business to borrow, to delay payments temporarily, to hedge FX or interest rate risk. None of that is wrong on its own. The key is never losing sight of the cash that will actually make growth sustainable — and never mistaking the rest for it. If you've ever looked at a strong bank balance and asked yourself where it really came from — I'd like to hear about it. Comment, or send me a message. Mala Sun — Founder of Stonerose Treasury