The Hidden Economics of Not Planning Your Finances

How do you imagine yourself in the future? I know, it’s a cliché — a big house, your own family, a passport full of stamps, and the time to do the things you enjoy. Everyone knows the secret ingredient: financial planning. But here’s the twist: company owners dream the same way. They imagine a new headquarters, a 10x increase in sales, and expansion into new markets. And just like you, their dreams collapse without one invisible ingredient: cash flow discipline. The difference? When individuals run out of money, they adjust their lifestyle and postpone their dreams. When companies do, they go bankrupt, killing the dreams of thousands of families.

This reminds me of Angelina’s story. She was the kind of entrepreneur newspapers love to write about: brilliant, magnetic, unstoppable. Her high-fashion and makeup startup made celebrities look flawless on TV shows and glossy covers. Her clients, team, and one of the major investors believed deeply in her talent. 

And then, almost overnight, it was over. No scandal. No competition. No bad product or service. Just no cash flow.

Most people think of financial planning as a boring accounting spreadsheet or something only finance people do. But it’s about making sure the future doesn’t surprise you, forcing you to act like a GPS, searching for the money earned and the money spent.

That’s why a lot of executives around the world, usually working for the biggest companies, every week, month, quarter, and year have financial review and planning meetings. They check revenues, expenses like payroll, facilities, taxes, and investments with extreme detail, but also the amount of the forecast versus the real amount executed for each concept. Most importantly, they understand the economic variations and explanations between.

One stunning truth of business is that the utility lies, but the money in the bank account never does.

A concept to master is Free Cash Flow (FCF), the money a company has left after paying all the bills, from vendors, investments, to employees, because it is the oxygen a business needs to operate day to day, survive challenges, pay back investors, and grow.

Many companies go bankrupt while reporting profits. How? Because they run out of money in their bank accounts, probably because they sell but don't receive the payment, or because they pay high interest that the utility cannot cover, or they spend more money to run the business than they sell.

Free Cash Flow highlights a financial reality: if it’s weak on a daily basis, it keeps you at risk, and your company will probably die of money starvation.

A Counterintuitive Truth

If you look at the vision proposed by most companies, you will notice they spend a lot of resources and focus on revenue growth, cost reduction, product and services launches, but nothing about cash flow as a main priority. The extreme pressure to achieve results focuses the vision on short-term thinking and profits, and this hides liquidity risks, where cash vanishes in missed or delayed collections, overstocked inventory, expensive loan payments, or simply bad tracking of how the money flows every moment. I have seen this same behavior in small and Fortune 500 companies that I’ve worked with.

The silent killer is invisible until it’s too late.

In this competitive world, payment cycles are extending, from 30-day terms to 90-day terms. Receivable accounts struggle with cash flow; vendors apply pressure for quicker settlements, especially when they themselves are under the same strain. Profits do not pay the bills; only cash does.

According to CB Insights, and their postmortem analysis of 111 startup failures, they discovered the boring fact that almost 3 out of 10 startups fail for no other reason than that they run out of money.  It's money, or more accurately, the absence of financial planning, and the financial missteps that go unreported until it's too late. Even so, innovative companies fail without basic economic discipline.

I propose this practical framework with actionable takeaways, easy to apply in a business context, to face the lack of control and follow-up on where the money is:

M - Monitor cash flow daily. Knowing the account balance at the end of the day is important, but it’s more important to know every payment, origin, and pending amount. In this stage, you can solve a lot of issues, even with a quick phone call to remind a client of a pending payment.

A - Actual figures can expose risks and opportunities that intuition hides. Knowing the forecast and math can show the alignment between pending payments and obligations. A red flag is when you have misalignment between the pending payments and obligations, even in hours. You will need bridge loans that come with a fee that starts to drain money and puts your obligations over the limit, so stress assumptions, and be aware of alternate actions.

C - Control your financial freedom. Well known as operational stability, this comes from cutting all the bad practices that drain value. Negotiate agreements with suppliers and clients, including contract terms and deadlines, increase collection effectiveness, obtain low interest rates, and invest money wisely. A common mistake is that the same person in charge of selling is the same person in charge of collections, generating friction in business relationships. They should be separate.

A - Accountability. Decisions are only as strong as the discipline to follow through. Take ownership, set checkpoints, with clear alerts for decision-making, because responsibility without tracking is just a wish. The key is aligning management incentives with liquidity, not just revenue.

Individuals, startups, and large companies have learned the hard way that after losing everything they have, they need to start again to rebuild. The main step is having financial discipline.

Now, years later, the daughter of Angelina, who once saw her mother’s business collapse, understands something few business schools teach in depth: Business success isn’t only measured by revenue, loyal clients, or creativity. It’s measured by the courage to count money, tracking every item, charging half in advance before delivering any work, and celebrating each small, profitable sale. The fear didn’t vanish, but it turned into focus with a real possibility of scaling and sustainably growing her business.