Running on Empty – Cash is Tight!


Updated by: Frank Pazera

There are times in almost every company’s life when the amount of cash needed for payroll and bills is greater than the cash on hand, and these excessive needs seemingly will continue for the foreseeable future.

How do you get through this tough cash flow period?

Does your company have a line of credit with a bank or other lender, and if so, has it drawn the full amount of available credit?  If not, then borrow additional funds to cover the current cash flow shortfall.  If the borrowings are already at the limit of available credit, then you need to carefully manage the cash receipts and disbursements. Whether or not you borrow additional funds to cover the current shortfall, you still need to conduct a comprehensive evaluation in order to identify the precise causes of the shortfall and put in place actions to prevent the shortages from persisting.

First, are your customer accounts stretching out in terms of the number of days outstanding?  Do you need to get more aggressive in calling your customers to request payment?

Second, have you reviewed your level of expenses as compared to your projected revenues?  Are the expenses exceeding the revenues, and if so, are there expenses that can be reduced or deferred to more closely match the current and projected level of revenue?

Third, are there new sales prospects and/or plans that can be implemented to increase revenue?

In addition, are there idle assets like older inventory items or equipment for which there is no current or projected use. Perhaps these can be sold to provide some additional cash?

Assuming you have taken all of these actions and still have more requirements than available cash, how do you manage to keep your vendors & suppliers supportive of the company, even when you cannot keep all of their accounts current?  One method is to develop a 13-week rolling schedule of cash – beginning balance, anticipated receipts, and cash requirements.  This entails identifying which specific customers may pay on specific weeks; which specific weeks will payroll and related taxes be paid; when will rent and other specific items be paid; finally, which vendors/suppliers will be paid (and how much) each week.  It is critical that every vendor be included in the schedule, not just the squeakiest of the wheels!  Then, at least, each vendor knows they are getting some amount of cash (probably not as much as they would like), but they are not being ignored.  And, track your actual results each week against the projections to ensure that going forward you can have some degree of confidence in the future weeks’ projections and your communications with your vendors/suppliers.

It is amazing (and rewarding) to see how supportive your vendors/suppliers can be in helping you get through tough cash flow periods, when they know that you are considering their business requirements by ensuring they are included in your payment schedules.  Besides putting together these weekly cash receipts/disbursement schedules, you now have a tool to use in responding to calls from your vendors enabling you to inform them of the projected amount to be paid.  If something happens to delay the projected disbursement or change the amount, it is critical to communicate that information to the affected supplier.  The supplier is much more likely to be supportive when you keep him/her informed and updated as to the status of your anticipated payments to them.

In summary –
1.    Identify the causes of your cash flow issues
2.    Determine actions that can be taken to stop or minimize the shortfalls
3.    Implement the actions that you can
4.    Carefully manage the cash balances, receipts and disbursements each week until the shortfall can be overcome (but don’t stop your corrective actions just because the immediate problem is solved)
5.    Continuously communicate with your vendors/suppliers, employees, etc. so they all understand the situation and what you are doing to ensure that they are being treated fairly and can have confidence in your ability to solve the problem

<strong>About CFO2</strong>
CFO2, a division of Bean Box Holdings, Inc, provides “on-demand” comprehensive services, including executive level financial expertise to emerging and established organizations in a wide variety of sectors. CFO2 drives value by allowing you to run your business, while we do the math. We can be found on the web at <strong>

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