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Cash flow problems don't start when your balance hits zero. They start when you lose visibility.
For growing SMEs — especially those operating across borders — it can happen fast. Exchange rates shift between invoicing and payment, balances fragment across multiple currencies and accounts, and one market ends up short on cash while another sits overfunded. By the time you notice, suppliers are waiting and growth stalls.
At iBanFirst, we work with international businesses tracking liquidity across currencies. The ones that stay in control? They're tracking the right metrics.
In this guide, we'll break down 11 cash flow KPIs you can use to measure your true financial health and liquidity in real time — not just every quarter. We'll explain what each metric represents, how to calculate it, what signals to watch for, and how to manage them when foreign currencies complicate the picture.
Why is tracking cash flow critical for virtually every business?
Cash flow determines whether you can meet obligations and keep operating without relying on short-term loans. Even profitable businesses with strong margins can struggle when costs spike faster than expected, customers are paying late, or your cash conversion cycle weakens.
Tracking your cash position regularly helps you:
- Spot pressure points before they become cash flow crises
- Identify seasonal patterns and supply chain bottlenecks
- Find opportunities to renegotiate payment terms or adjust inventory planning
- Maintain enough liquidity to operate through rough patches
For international businesses, cash flow visibility across currencies matters just as much, if not even more. Exchange rate swings can significantly impact SMEs if you're not paying attention.
If you're actively monitoring your cash positions across currencies and keeping tabs on FX movements, you can balance your FX exposure, plan ahead for exchange rate volatility (which is inevitable), and make faster, less reactive financial decisions.
How do you measure cash flow?
Cash flow gets measured through the cash flow statement, which breaks activity into three categories:
- Operating cash flow: Cash generated by your main business activities
- Investing cash flow: Asset purchases, acquisitions, or proceeds from selling long-term assets
- Financing cash flow: Capital movements like borrowing, repayments, or dividend distributions
Together, these sections show how efficiently cash moves through your business and whether operations generate enough to fund future growth.
Most companies track cash flow at least monthly as part of their month-end close process, alongside liquidity ratios such as the operating cash flow ratio or cash flow coverage ratio.
So which metrics or ratios should you actually be measuring?
Let's break it down.
11 best cash flow metrics to track (and how to calculate each)
Each of these KPIs reveals a different layer of your financial health — from liquidity and solvency to forecasting accuracy across markets and currencies.
1. Operating cash flow (cash flow from operations)
Operating cash flow (OCF) measures how much cash your business generates from day-to-day operations. It's the best indicator of whether your model is sustainable.
It excludes financing and investment income to focus on recurring activities like sales, payroll, and supplier payments — the measures that help your business operate.
A consistently positive figure signals healthy working capital and reliable earnings quality. If OCF is consistently negative — and not intentionally so — you're burning through reserves to fund operations. That's a problem.
For international businesses, tracking OCF in the local currencies you regularly transact in can also give a clearer sense of how much liquidity each market actually generates.
How to calculate operating cash flow
Operating cash flow formula: Net income + Non-cash expenses ± Changes in working capital
Where:
- Net income = Your bottom-line profit after all expenses and taxes
- Non-cash expenses = Depreciation, amortisation, and other costs that don't involve actual cash leaving the business
- Changes in working capital = Movement in accounts receivable, inventory and accounts payable that affects available cash
2. Operating cash flow margin
Operating cash flow margin shows how well sales turn into cash. It measures how well you're translating revenue into liquidity.
A high operating cash flow margin means your operations are producing steady, tangible cash flow. On the other hand, a low margin signals inefficiency that may lead to financial issues over time.
For international business working across multiple currencies, like importers and exporters, make sure to pay close attention to your OCF margin. You're often balancing the timing differences between incoming and outgoing payments, along with the added variable of currency exchange. This margin can tell you whether or not that balance is working.
How to calculate operating cash flow margin
Operating cash flow margin formula: (Operating cash flow / Net sales) × 100
Where:
- Operating cash flow = Cash generated from core business activities
- Net sales = Total revenue from sales after returns, discounts, and allowances
3. Free cash flow (FCF)
Free cash flow shows how much cash is left after covering operational expenses and capital investments.
It's one of the best measures of flexibility in your finances—the funds available to repay loans, pay dividends, or invest in growth. Strong FCF means your business can expand, distribute profits to shareholders, or weather FX volatility storms without requiring outside funding.
For businesses with multiple foreign subsidiaries or entities, FCF also identifies which subsidiaries generate surplus cash and which are reliant on internal transfers. That visibility matters when you're budgeting across markets.
How to calculate free cash flow
Free cash flow formula: Operating cash flow − Capital expenditures
Where:
- Operating cash flow = Cash generated from core business activities
- Capital expenditures = Money spent on long-term assets like equipment, property, or technology
4. Cash flow coverage ratio
The cash flow coverage ratio measures how well your business generates cash to handle debt obligations.
It shows whether your operating cash flow can comfortably repay what you owe while meeting ongoing interest and principal payments. A higher ratio signals stronger solvency and repayment capacity, which helps to maintain shareholder or leadership confidence and healthy credit terms.
For companies with loans across multiple countries or currencies, calculating this ratio at the currency or subsidiary level can show whether your domestic cash flow is enough to service the loans on its own.
How to calculate cash flow coverage ratio
Cash flow coverage ratio formula: Operating cash flow / Total debt
Where:
- Operating cash flow = Cash generated from core business activities
- Total debt = All outstanding debt obligations (short-term and long-term combined)
5. Cash conversion cycle (CCC)
Your cash conversion cycle measures how long it takes to turn investments in inventory and production into cash receipts.
It captures the combined efficiency of receivables, inventory, and payables management. A shorter cycle means faster liquidity turnover—a real advantage when you're operating internationally with varying payment norms and shipping times.
For international businesses, improving your cash conversion cycle can become a great supply chain risk management strategy. If you're able to negotiate favourable terms with both your customers and suppliers, you may even be able to achieve a negative cash conversion cycle where you're receiving cash from your customers before you need to pay suppliers.
How to calculate cash conversion cycle
Cash conversion cycle formula: Days inventory outstanding + Days sales outstanding − Days payable outstanding
Where:
- Days inventory outstanding = Average number of days inventory sits before being sold
- Days sales outstanding = Average number of days to collect payment after a sale
- Days payable outstanding = Average number of days your business takes to pay suppliers
6. Days sales outstanding (DSO)
Days sales outstanding measures how long it takes to collect cash after a sale.
A low DSO means your collections and accounts receivable processes are strong. Conversely, a high DSO can signal challenges with credit or invoicing collections.
If your DSO is high, the issue may be that you're making it too difficult for customers to actually pay you. One common cause we see, specifically for businesses working across borders, is based on the currency you're asking your customers to pay you in. If you're forcing your customers to convert their local currency into something else—say, US dollars—that's going to add friction to the process. And the more friction there is, the more likely you'll be to run into accounts receivable issues.
Tracking DSO by country can also help highlight specific markets with slower payment cycles. Improving collection terms in those markets can unlock significant working capital that would've otherwise gone unnoticed—especially when you're managing international payments across multiple regions.
How to calculate days sales outstanding
Days sales outstanding formula: (Average accounts receivable / Net credit sales) × 365
Where:
- Average accounts receivable = Total accounts receivable divided by number of periods tracked
- Net credit sales = Total sales made on credit terms (excluding cash sales)
7. Days payable outstanding (DPO)
Days payable outstanding shows how long your company takes to pay suppliers.
Think of DPO as the inverse of DSO. A higher DPO means liquidity is strong and you're holding onto cash longer.
In theory, it may seem like the higher your DPO, the better, no matter what. But in reality, if your DPO is too high, it can lead to frustrations and poor supplier relationships. As a result, pricing can get worse, payment terms can tighten, and you may become less of a priority for them.
DPO works best when you analyse it alongside DSO. Together, they can show you a more complete working capital picture—especially when you're getting paid in foreign currencies while paying suppliers in others.
How to calculate days payable outstanding
Days payable outstanding formula: (Average accounts payable / Cost of goods sold) × 365
Where:
- Average accounts payable = Total accounts payable divided by number of periods tracked
- Cost of goods sold = Direct costs of producing goods or services sold during the period
8. Working capital ratio
The working capital ratio compares current assets to current liabilities. It shows you your short-term solvency in a single number.
A ratio greater than one means you can cover obligations comfortably, while a ratio less than one means liquidity is tight and you may end up stretching to meet near-term payments.
When you're operating across currencies, track this carefully. If your liabilities are heavily denominated in one currency while assets are in another, make sure to factor in the exchange rates between each currency.
How to calculate working capital ratio
Working capital ratio formula: Current assets / Current liabilities
Where:
- Current assets = Cash, accounts receivable, inventory, and other assets expected to convert to cash within one year
- Current liabilities = Debts and obligations due within one year (accounts payable, short-term loans, accrued expenses)
9. Cash flow adequacy ratio
Cash flow adequacy ratio shows whether your operating cash flow can fund essential outflows like debt repayments, dividends, or other capital expenditures.
It's a long-term liquidity indicator.
Business growth is great... until it starts to outpace your available cash. This ratio can help you track whether you're staying ahead or falling behind.
For international businesses, it also helps assess whether foreign subsidiaries are self-sufficient or if they'll need capital injections from the parent organisation. A ratio greater than one suggests strong financial independence and stability, while less than one means the subsidiary may require external funding.
How to calculate cash flow adequacy ratio
Cash flow adequacy ratio formula: Operating cash flow / (Capital expenditures + Debt repayments + Dividends)
Where:
- Operating cash flow = Cash generated from core business activities
- Capital expenditures = Money spent on long-term assets like equipment or property
- Debt repayments = Principal payments on outstanding loans
- Dividends = Cash distributions to shareholders
10. Cash burn rate
Cash burn rate tracks how quickly reserves get used to fund expenses.
For growth-stage businesses that've raised capital and are intentionally operating at negative margins, your cash burn rate is essentially your remaining lifespan (or the clock that's counting down until you'll need to raise more capital to stay alive).
And for businesses that're trying to run a profitable operation, if your burn rate is decreasing over time, that's a sign that your operations are getting more efficient. If not, you may be spending faster than planned—or faster than you're able to keep up with.
How to calculate cash burn rate
Cash burn rate formula: (Beginning cash − Ending cash) / Number of months
Where:
- Beginning cash = Cash balance at the start of the period
- Ending cash = Cash balance at the end of the period
- Number of months = Length of the measurement period
11. Forecast variance (cash flow forecast accuracy)
Your cash flow forecast variance compares projected cash flow with actual results.
Consistent, high levels of variance can indicate problems with your forecasting process, like poor data quality, unrealistic assumptions, or unaccounted-for foreign exchange impacts. Over time, if you are missing your forecasts, try to spot trends that could be leading to the misses.
Assess whether you may be over- or under-estimating variables like:
- Realized revenue
- Exchange rate gains or losses
- Accounts receivable delays
- Supply chain challenges
And so on.
For cross-border businesses in particular, exchange rate fluctuations can be a common factor that leads to inaccurate forecasts. If you aren't factoring in any exchange rate swings, your forecasting will almost always be off in practice.
Of course, simply factoring these exchange rate swings into your forecasts isn't as easy as it sounds. After all, will rates go up? Will they go down? Sure, you can make an educated guess—but it's still a guess at the end of the day.
Instead, make sure you're working with a cross-border payment provider that'll enable you to use FX forward payment contracts to lock in rates regardless of how the markets move over time. If you're working with iBanFirst, you'll be able to access three different types:
- Fixed forward payment contracts: Lock in one rate for a future payment on a set date.
- Flexible forward payment contracts: Lock in a rate, but draw down against it across multiple instalments when exact payment due dates can vary.
- Dynamic forward payment contracts: Set a floor rate, but keep the upside if the market moves in your favour.
How to calculate forecast variance
Forecast variance formula: (Forecast − Actual) / Forecast × 100
Where:
- Forecast = Projected cash flow amount for the period
- Actual = Real cash flow amount recorded at period end
How to track cash flow across multiple currencies
Managing cash flow across multiple currencies is complex because exchange rates constantly affect the value of inflows and outflows.
Without proper visibility, you end up profitable on paper while facing cash shortages in one market and holding excess in another. The numbers don't line up because you're checking balances across multiple accounts, converting everything back to your home currency manually, then trying to sum it all up.
Multi-currency accounts fix this.
Instead of trying to manage multiple currencies across a string of traditional bank accounts in each region, everything lives under one roof. Think of it like having a wallet containing every currency you need for your business—euros, dollars, yen, and so on.
One of the biggest advantages this creates?
Centralised visibility.
If you're working with iBanFirst, you'll be able to see your currency cash position across all currencies, converted back to your home currency in real-time. No more complex spreadsheets or manually converting balances based on the rate that a quick Google search spat out. The number will be right there in front of you whenever you need it.
Start managing multiple currencies today with iBanFirst
Managing cash flow across multiple currencies is complex.
Exchange rates shift constantly, cash balances fragment across accounts, and maintaining visibility is a constant battle. But that doesn't have to be the case. iBanFirst is purpose-built to help international SMEs like you manage international payments, currency conversions, and FX risk from one place.
When you open an iBanFirst account, you can:
- Hold, send, and receive funds across 25+ currencies from a single platform
- Track international payments in real time with detailed updates at every step
- Protect profits from exchange rate swings with fixed, flexible and dynamic FX forward payment contracts
- Get support from real FX specialists who understand cross-border operations
Want to see how it works? Request an account today or take the interactive product tour to explore the platform yourself.
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