When Cash Runs Short, What to Do in the First Two Weeks

Here is a sequence that does not.

Day 1. Find out exactly where you are

Not an estimate. The actual position.

Bank balances today, across every account.
Every payment committed in the next 30 days, by date.
Every receivable, by customer, with the date you realistically expect it.

Two hours of work. Most owners in difficulty have not done it, and are managing on a feeling.

Day 2. Build the 13-week forecast

Week by week. Money in by named customer, money out by named payee.

Find the lowest point. That number and its date are the problem you are solving. Not the general sense of pressure.

Day 3. Separate what you must pay from what you can move

Never delay these three.

Payroll. The damage to your business outlasts the shortfall by years. VAT and Corporate Tax. Delaying converts a cash problem into a compliance problem with a federal authority, and the second is far harder to fix.
Anything with a personal guarantee.

Can usually be moved, with a conversation. Suppliers, especially larger ones who want to keep you. Discretionary spending. Non-critical contracts.

Days 4 to 7. Have the conversations early

This is the part people avoid, and delay is what turns a manageable position into a serious one.

Call suppliers before you miss a payment, not after. A supplier told in advance will usually agree terms. A supplier who discovers it by a failed payment will not.

Call customers with old balances and ask for a specific date. Offer a payment plan rather than pressing for the full amount.

Call your bank before you breach anything. Lenders respond considerably better to early notice than to discovery.

Week 2. Fix what caused it

The forecast tells you which of these it is.

Timing. Profitable, collection is slow. Fix invoicing speed and chasing.

Growth. Consuming cash faster than it produces. Needs funding or slowing.

Margin. Busy and not profitable. No collection improvement fixes this. It is a pricing problem.

Leakage. Money going out that nobody can account for. Review every payment for one month.

Treating a margin problem with better collection is the most common wasted effort in this situation.

What not to do

Do not borrow in a panic. Facilities arranged under pressure cost more and lenders notice the circumstances.

Do not pay the smallest suppliers last. They can least afford it and they remember.

Do not stop producing management accounts. Businesses in difficulty often stop looking, at the moment when looking matters most.

Do not take money out of the business for personal use while creditors are unpaid.

When to get help

If the forecast shows you cannot meet obligations as they fall due within the 13 weeks, take advice. Directors' obligations change as a company approaches insolvency, and the options are better earlier than later.

Where we fit

We build the forecast and work through the position with clients. If you have not done day 1, that is the whole first step and you can do it yourself today.