Checklist of Cash Flow Crunch Warning Signs – CLIENTS

Whether your business is rolling along at full speed or barely managing to hang on, a “cash flow crunch” can be devastating in a very short time.

What is a cash flow crunch?
Cash flow is the inflow and outflow of money from a business. It is necessary for your day-to-day operations, funding payroll, paying vendors, purchasing inventory and other operating costs.

Positive cash flow is when your business has more money coming in vs. going out; over the long-term, this is how value is created shareholders.

Negative cash flow is when more money is flowing out from the business in the form of accounts payable, debt and interest payments, payroll, rent and other expenses.

A cash flow crunch occurs when a state of negative cash flow is substantial enough to impact operational functionality, either for a short or sustained period.

What are the warning signs?
Check out the “warning signs checklist” below and see if any of these traits are showing at your business:

Revenue issues:
• Low sales volume
• Rapidly expanding sales volume
• Market and seasonal fluctuations
• Allowing too many accounts to become past-due receivables.
• Reliance on receivables concentrations (i.e., big customers) who pay late.
• Offering too many customers delayed payment programs.

Expense items:
• Gross margins are too low (you’re paying too much for inventory or not charging enough)
• Slow moving, obsolete inventory
• Net margins are too low (operating costs are perhaps out of control)
• A long lead-time between raw materials purchases and finished goods.
• Losing out on discounts with suppliers and vendors
• Employees are not operating near maximum productivity.
• Plant or offices are too large, causing waste of resources.

Cash and debt concerns:
• Inadequate cash reserves
• Lack of sufficient working capital line of credit
• Over reliance on short-term debt to fund cash flow
• Funding fixed with short-term debt or current assets with long-term debt.

A cash flow crisis can be devastating. Unfortunately, entrepreneurs who have never encountered these problems get “taken by surprise, even when the business seems to be going great. It is a sad fact that such as crisis can cause a business to fail very quickly, finding itself in bankruptcy.

MyCFO can help your business!
Whether your business is rolling along at full speed or barely managing to hang on, a “cash flow crunch” can prove devastating in a very short time. The professionals at MyCFO would be pleased to discuss how we can help your business in managing cash flow.  Contact us today for a free initial consultation!