The audit isn’t about how much cash you have. It’s about whether you can see the next three months coming, and whether the way you buy, sell and pay works for you.

Open your bank accounts, your processor payout reports, your open purchase orders and your inventory report. Score each check 0 to 2: 0 if it failed or nobody can answer it, 1 if partly true, 2 if clean. “Our accountant has that” scores 0 unless the accountant can answer today.

If nobody can say when the money comes back, nobody is managing it.

The twelve checks

1. You know your cash conversion cycle, including payout lag · 5 minLook at: Your last three purchase orders and your processor payout reports.
   Good: Someone can say, in days, how long cash is out from the supplier deposit to the customer’s payout reaching the bank, for your top products.
   Cost if wrong: You plan growth on profit and find out about the cash gap from the bank balance.
   Read next: The Cash Conversion Cycle
2. Every open purchase order’s payments are on one calendar · 4 minLook at: Your open POs.
   Good: Each deposit and balance payment, with its amount and date, sits in one list that the person running cash reads weekly.
   Cost if wrong: A balance payment lands in the same week as a tax bill and a slow payout, and nobody saw it coming.
   Read next: The Weekly Cash Meeting
3. A 13-week cash forecast, updated weekly · 3 minLook at: Whether a week-by-week forecast of cash in and out exists, and when it was last updated.
   Good: Thirteen weeks ahead, updated every week, with last week’s forecast compared with what happened.
   Cost if wrong: You manage cash by looking at the bank balance, which tells you about the past.
   Read next: The Weekly Cash Meeting
4. The growth plan was checked against cash · 4 minLook at: This year’s revenue plan.
   Good: Someone calculated how much extra stock the plan needs, when it must be paid for, and where that cash comes from.
   Cost if wrong: You hit the revenue plan and run out of money in the same quarter.
   Read next: Profit Is an Estimate
5. Weeks of cover by product, with slow stock flagged · 4 minLook at: Your inventory report.
   Good: For every product, stock on hand and on order divided by recent weekly sales, with anything over your target flagged and owned.
   Cost if wrong: Cash sits in the products nobody’s buying while the bestsellers stock out.
   Read next: The Cash Scorecard
6. Order size is set by math, not by the minimum · 4 minLook at: Your last five POs and the supplier’s minimums.
   Good: Each order size was chosen by weighing the unit-price break against the months of stock it buys, and you’ve asked for a lower minimum at least once.
   Cost if wrong: You save 8% on the unit and tie up cash for twice as long.
   Read next: Smaller Orders, More Often
7. You’ve asked for better terms in the last year · 3 minLook at: Your supplier agreements and emails.
   Good: Deposit, balance timing and payment method were negotiated, in writing, within the last twelve months, with something offered in return.
   Cost if wrong: You’re paying a deposit set for a brand a tenth of your size.
   Read next: Supplier Terms
8. Launches and restocks are sold before they’re paid for · 4 minLook at: Your last three launches or big restocks.
   Good: At least one was sold by preorder or a waitlist, with existing customers offered first access, and the cash collected was counted against the purchase order.
   Cost if wrong: You fund every launch yourself and learn about demand after you’ve paid for the stock.
   Read next: Preorders and Waitlists
9. Preorder ship dates have a written basis, and a delay notice is ready · 3 minLook at: Your preorder product pages and your delay email.
   Good: Every stated ship date traces to a supplier confirmation, and a delay notice that offers a full refund is written and ready.
   Cost if wrong: A slipped date becomes a federal compliance problem as well as a customer one.
   Read next: The Rules on Shipping Late
10. Gift cards, store credit and prepaid plans are tracked as liabilities · 4 minLook at: Your balance sheet and your gift card and store credit reports.
    Good: The outstanding balance of each is on the balance sheet, reconciled monthly, and your accountant has set a breakage policy that allows for unclaimed property law.
    Cost if wrong: Cash you owe customers gets spent as if it were yours, and breakage gets booked that a state may claim.
    Read next: Float
11. You know how much cash your repeat customers bring in · 3 minLook at: Last quarter’s revenue by new and returning customers.
    Good: You know the returning share of revenue, and the marketing cost attached to each.
    Cost if wrong: You fund growth by buying new customers at full price while the cheapest cash you have goes unasked.
    Read next: Retention Pays in Cash
12. Financing is arranged before you need it · 4 minLook at: Your credit line, if any, and any financing offers you’ve taken.
    Good: A facility is in place and undrawn or lightly drawn, and every option you’ve used was compared on its total cost in dollars and as an annual rate.
    Cost if wrong: You borrow in a hurry, from whoever says yes, at whatever it costs.
    Read next: Borrowing Against Inventory

Score as you go; your band appears when all twelve are in.

Read your score

If you hold almost no stock, score checks 5 and 6 as 2. If you’ve never sold gift cards or store credit, score check 10 as 2 only if you decided not to.