What to do when you’re facing cash flow problems

14 December 2022

When it comes to tackling cash flow problems, prevention’s better than cure.

At FTS we often speak with directors who are experiencing cash flow difficulties for a variety of reasons. Whilst every case is unique, we’ll often suggest following this sensible checklist…

  1. Monitor the position – produce a daily/weekly forecast to ensure the position isn’t worsening over time.
  2. Be mindful of your fiduciary duties – a company can be deemed insolvent on either a balance sheet or cash flow basis. This should include a weekly Board Meeting where reasons for continued trade are clearly outlined.
  3. Speak with suppliers – keep an open line of discussion to avoid potential further issues.
  4. Focus on debtor collections – others may be in the same position and it’s important you maximise your prospects of getting paid.
  5. Consider cost cutting measures – these could include premises, staffing, utilities, and loss-making contracts.
  6. Take professional advice – many times this will mean a free initial consultation meeting (that’s what you can expect with us!)
  7. Consider all options – just how desperate is the situation? Is the funding gap short term or is there a greater issue? Refinance/additional borrowing and equity investment are two softer options to consider which we can help with.
  8. Understand the worst-case backstop – this is often not as bad as first feared. There are many tools in our restructuring toolkit!

As with any kind of problem, cash problems won’t go away on their own. Even in the most profitable businesses, cash flow issues can be a catalyst for financial decline. To reduce the risk of liquidity, we’ll help recommend and justify what can be done to improve your cash flow.