Cash Flow Crisis? Don’t Panic!

October 31, 2016 By Dave Chase

Businesses, whether small or large, strive for steady and solid growth. The ongoing process of an organization’s growth is sustained by several different factors, one of which is the company’s finances. Monitoring the inflow and outflow of your company’s cash is critical to ensuring growth, yet few business owners manage cash flow effectively.

As we know, cash is king. So it makes sense for business owners to focus large portions of their attention to cash flow, right?

Yep, not a trick question.

The term cash flow is used to define the process of money coming and leaving your business. To put it simply, a business experiences positive cash flow when its financial inflow (accumulated by various revenue sources) is greater than the amount of funds leaving the business through expenses. A negative cash flow — or cash burn — occurs from the exact opposite equation: the business’ financial outflow (totaled by various expenses) is greater than its inflow.

Businesses will generally not achieve financial control and positive cash flow right from the get-go, nor does it often happen overnight. The journey to achieving positive cash flow could be made difficult because your businesses may lack the means to manage cash flow using proper strategies and expertise.

However, solving negative cash flow problems starts with identifying the issues. Evaluate where your company burns its cash the quickest and pinpoint missed opportunities to increase cash. Is your business waiting for the next big deposit from your top-spending client just to keep things running? Would you like to accept discounts on accounts-payable bills, but can’t due to your lack of cash? If these scenarios mirror your financial standing, it’s time to address your company’s cash flow problems.

Struggling businesses can embrace changes that will foster better cash flow management. Depending on your business’ needs, here are some actions you need to take:

  • If you have bank loans, protect that relationship by communicating often and early of your challenges, as counterintuitive as that may sound.
  • If you don’t have bank loans, begin establishing relationships that will allow you to put a line of credit in place for the tighter times.
  • Plan for financial shortfalls by maintaining a solid cash reserve to keep your business afloat.
  • Find potential problems as early as possible. This can be achieved with weekly or monthly forecasting cash flow thresholds.
  • Ask your best paying customers to accelerate their payments and offer small discounts off the bill. Even consider having payments due immediately.
  • Prioritize your business’ bills and know what essentials must be paid first.

Another consideration to help manage cash flow is to seek professional help. Find someone to advise you on solutions that may be available in your particular circumstances.  This should be an individual or firm that has been there before and can help you see around corners.  These are the times, though feeling strapped, when you can’t afford not to find capable advice.


Dave Chase is a partner at Advanced CFO Solutions.  At Advanced CFO Solutions, we provide outsourced accounting and financial services. We have served with more than 450 companies. Our clients see us as their strategic, outsourced CFO.  We provide CEOs with critical information so they can make key decisions with confidence.  We do this by leveraging our experience and technology to provide actionable information and results.  And, we do it for a fraction of the cost of a full time employee.  For more information, click here.

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