The Cash Flow Health score is one of the most looked-at numbers in Finoya and also one of the most frequently questioned. This article explains how the score is calculated and addresses the most common reasons it looks unexpected.
How the score is calculated
The Cash Flow Health score is a number from 0 to 100. It is calculated from seven underlying metrics pulled from your financial data:
• Days Cash on Hand
• Burn Rate relative to cash balance
• Projected inflows versus projected outflows in the next 30 days
• Overdue invoice amount as a proportion of total receivables
• Unpaid bills relative to available cash
• Working capital position
• Revenue trend over the recent period
Each metric is weighted and contributes to the overall score. A score above 70 is healthy. Between 50 and 69 is moderate. Between 30 and 49 means there are areas needing attention. Below 30 is critical.
Related article: Cash Flow Health score explained (Collection 2: For Small Businesses) |
Why the score might seem low when the business feels healthy
High overdue invoices dragging the score down
Overdue receivables are one of the more heavily weighted factors. A business can have healthy revenue and a solid bank balance but still score poorly if a large proportion of invoices are overdue. The score reflects liquidity risk, not just current cash. Money owed but not collected is a risk even if the business feels fine today.
Check the overdue invoices figure on your dashboard. If it is high relative to your total receivables, that is likely the single biggest factor pulling your score down.
Projected inflows showing as zero or very low
Projected Money In only counts invoices that have been raised and are outstanding in your accounting software. If your business collects revenue quickly, frequently as cash sales, or raises invoices after payment rather than before, your Projected Money In may be very low or zero even though your actual income is healthy.
A low Projected Money In signals to the score that future liquidity is uncertain, which reduces the score. This is a data entry pattern issue rather than an actual financial risk. The fix is to raise invoices in your accounting software before payment is collected rather than after.
Burn rate spike from a one-off expense
If you had an unusually large one-off expense in the recent period, your burn rate calculation will be elevated. The score uses your burn rate to assess how quickly you are consuming cash. A temporarily high burn rate from a capital purchase or a once-a-year payment will make the score look more stressed than your normal operating position warrants.
This will correct itself at the next sync once the unusual expense moves into historical data and the burn rate normalises.
Why the score might seem high when the business has concerns
The score reflects the data that Finoya can see, which comes from your accounting software. If your accounting software is missing data, the score cannot account for those gaps.
Common situations where the score overstates health:
• Bills have not been entered as payables in your accounting software, so Projected Money Out is lower than your actual obligations
• You have informal payment obligations that are not recorded anywhere in the accounting software
• Revenue has dropped but the invoices for new work have not yet been raised, so the revenue decline is not visible in the data yet
The score is only as accurate as the data feeding it. Keeping your accounting software current and entering bills promptly gives you a score that actually reflects your position.
Why the score changed significantly week to week
A large movement in the score between syncs usually means one or more of the underlying metrics changed significantly. The most common causes:
• A large overdue invoice was paid, reducing the overdue receivables metric
• New invoices became overdue since the last sync, increasing the risk metric
• A large bill was paid or entered, changing the payables position
• Revenue in the current period is significantly higher or lower than the previous period
Open Ask Noya from the Cash Flow Health page and ask: "Why did my cash flow score change since last week?" Noya will analyse the underlying metrics and tell you which factors moved and in which direction.