Float: Your Most Underrated Growth Tool
Margins are great. Cash is better. Float is king.
My team will tell you that I obsess over the concept of float. Whether it’s reviewing capital raise (debt) docs or discussing cash conversion cycles. I want to share why I care as much as I do about float.
While robust gross margins are a foundational necessity, they alone do not guarantee resilience. I’ve observed that even with ostensibly healthy 70%+ gross margins (at scale), the absence of strategic float and robust free cash flow can leave a business acutely vulnerable to the operational pressures of inventory cycles, OPEX, and debt obligations.
Why? Because cash is what keeps the lights on, and more importantly, it’s what fuels growth. And not all revenue is created equal when it comes to cash. This is where float comes in — the often misunderstood and underleveraged advantage of having access to cash you don’t technically own yet, but can use to operate or grow your business.
In this essay, I want to explain why founders and investors need to obsess over it—just like we care about our margin stack or our LTV:CAC ratios.
Let’s dive in.
1. Float: The Unsung Lever of Growth and Resilience
While conceptually straightforward, float is the temporal arbitrage between cash inflow and outflow— and it remains a vastly underutilized strategic asset for most brands I see. It represents the delta between customer receipts and supplier disbursements, that critical lag where capital operates freely within your company. In a DTC model: immediate customer payment coupled with a 30-60 day vendor payment cycle. When amplified, this temporal discrepancy transforms into non-dilutive, cost-free working capital.
This is not an accounting footnote; it is a driver of sustainable growth. Businesses that optimize float demonstrably reduce their reliance on external financing, unlocking the capacity for organic expansion and enhanced operational resilience. Float facilitates self-funding, a crucial advantage as market conditions on the ground are constantly changing.
The prevailing founder's fixation on external capital raises, while understandable, often obscures the more potent lever: float maximization. True financial mastery lies not in perpetually seeking external validation through fundraising, but in the intelligent manipulation of internal cash flow dynamics.
2. The Cash Conversion Cycle: Where Float Lives
To understand how to control float, you need to understand your cash conversion cycle (CCC) — an often underappreciated metric in consumer finance.
The CCC tells you how many days it takes for a dollar invested in inventory or operating expenses to return to your bank account as cash. A shorter cycle means you get your money back faster. A longer cycle means your cash is tied up and unavailable.
Here’s the basic formula:
Cash Conversion Cycle = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) – Days Payable Outstanding (DPO)
• DIO: How long inventory sits before it sells. Lower is better.
• DSO: How quickly you collect cash after a sale. For DTC, this is basically zero — you get paid upfront. For wholesale, it could be 30–90 days.
• DPO: How long you can wait before paying suppliers. Higher is better.
The goal is simple: shorten DIO and DSO and lengthen DPO. This will shorten your cash conversion cycle and increase your float.
Let’s put this in real terms:
A DTC brand with zero DSO (fast cash disbursements from Shopify sales), 60 DIO (inventory turnover), and 30 DPO (vendor terms) has a CCC of 30 days. That’s good.
A wholesale-heavy brand with 30 DSO, 60 DIO, and 30 DPO has a CCC of 60 days. That requires careful cash management.
The second brand has to fund three months of operations before they get paid. That means more cash tied up, more risk, and often more debt.
Now imagine two brands growing at the same rate, but one has a CCC of 30 days and the other 60 days. The first brand can turn its cash over 12 times per year. The second? Just 6 times.
That’s why float is so powerful. The same dollar can work harder, more often, if you manage float well.
3. Tactics to Improve Float
Improving float is not theoretical — it’s tactical. Here’s how founders can actively increase float in their businesses:
Negotiate Better Payment Terms (DPO)
This is the most direct lever. If you can, push for net 30, 45, or 60 terms with vendors and suppliers. The larger your order volume and the stronger your track record, the more leverage you have.
Accelerate Inventory Turnover (DIO)
The accelerated turnover of inventory—a reduction in Days Inventory Outstanding (DIO)—directly correlates with the liberation of working capital.
Enable smart merchandising and demand planning that avoids overbuying.
In essence, rapid inventory movement is not just a function of sales; it's a critical component of float maximization. When items sit idle, it creates lost opportunity, which creates capital inefficiency. Prioritizing inventory velocity will enhance float.
Get Paid Faster (DSO)
Wholesale brands should consider invoice factoring tools and AR financing to reduce impact on DSO.
The DTC business model inherently supports healthier CCC because you get cash at checkout. But it doesn’t scale as much as wholesale. Velocity mapping with wholesale is completely different.
Leverage Credit Cards and Payment Platforms
Good credit cards can give you 30–60 days of float on expenses, especially digital ad spend, packaging, freight, etc. Used wisely, they are interest-free (or low fees) working capital.
Pick cards with high limits, long payment cycles, and rewards that matter (e.g., cash back on ads or shipping).
Manage payment cycles to align with revenue seasonality
If you need introductions to fintech companies that are helping brands get float, just email me at faheem@financewithin.com and someone from my team will help.
4. Financial Infrastructure: The Engine Behind Float
Managing float isn’t just about strategy — it requires infrastructure.
Here’s what a solid financial infrastructure looks like:
Treasury Management
If you have strong liquidity or are just coming off a capital raise, consider this:
Move excess cash to high-yield business accounts or money market funds.
Don’t let capital sit idle in a non-yield checking account.
Establish cash management policies: operating cash vs reserve cash vs investment cash.
Even 3-4% annual yield on idle cash adds up — especially on large figures of float.
Important to note, though: interest yield is considered ordinary income. If you’re an S-Corp, this requires careful planning with your CPA if you’re profitable and growing.
Banking and Credit Relationships
Don’t settle here. The right banking and credit partner can help unlock significant float opportunities.
Short term: standard credit cards offer statement balances, but newer fintech companies provide rolling 45-60-90 terms.
Flexible credit lines tied to AR or inventory.
If you’re planning to raise debt, I wrote a detailed essay here.
Preferred payment terms for transfers, FX, or trade finance.
Best time to raise cash is when you have cash… always aim to have faster access to capital when needed.
Debt is a tool in the toolbox. You should use it to finance working capital gaps in your business. Even when you are cash-rich, debt is a great tool, especially when you can collateralize it. Good quality debt and credit products extend float and help smooth cash cycles.
Founders should treat banking and credit partners as a strategic relationship, not just a utility. And float is an asset when you manage risk. Use credit pragmatically, not desperately.
5. Float as a Competitive Advantage
Brands that master float have more optionality.
They can invest aggressively in growth without diluting equity
They can weather downturns, supplier delays, or unexpected costs
They can negotiate from strength — with retailers, investors, and acquirers
In M&A, a brand with strong float and tight CCC can command a higher multiple vs a brand constantly raising capital to cover its cash cycle.
Investors see it, too — cash-efficient growth is more valuable than high-burn growth. Float is a signal of operational excellence.
Final Thoughts: Make Float Part of Your Culture
Founders can sometimes treat cash management as a “finance-department” problem. It’s not.
Float can be a competitive advantage. It needs to be part of your culture — from how you plan inventory and merchandising, to how you negotiate contracts, to how you manage your P&L.
Margins are great. Cash is better. Float is king. Treat it that way; your business will compound faster, with less stress and more control.
That’s the game.
P.S.
And to drive this point home, let’s look at a few examples of float in the wild with large companies.
Buffett’s Use of Float
Buffett used insurance float as the foundation of Berkshire Hathaway’s growth. Here’s how it worked:
Insurance companies collect premiums today but don’t pay out claims for months or years
That premium money — float — sits with the insurer in the meantime
Buffett invested that float into stocks and businesses, compounding returns
Crucially, he got to use other people’s money for free, as long as insurance operations broke even or better
Over decades, float from insurance companies like GEICO and National Indemnity gave Berkshire access to hundreds of billions in low-cost capital, fueling investments in everything from Coca-Cola to railroads.
Amazon and Negative Working Capital
Amazon operates with negative working capital. Customers pay immediately, but Amazon often pays suppliers 30–90 days later.
This gives Amazon excellent float
They use it to reinvest in growth — logistics, tech, pricing power — without always needing outside capital
It’s a cash flow machine
Costco
Costco has low gross margins, but incredible cash efficiency.
Members pay upfront for annual memberships — float.
Costco sells inventory faster than it pays suppliers — float.
The result? Strong free cash flow and the ability to compete on price without crushing margins.
Rapid Fire Round:
Apple: Sells iPhones upfront, pays suppliers later — huge float. Uses it for R&D, stock buybacks, etc.
Subscription businesses: Collect $ upfront (e.g., SaaS, gyms, meal kits) — predictable float.
CPG Brands with Retail Terms: Get paid by retailers on Net 60–90, but pay vendors Net 30 — negative float unless managed tightly. Prime example of why many high quality brands with durability in margins run into liquidity issues.