Cash Flow Management in Uncertain Times: Why It's a Leadership Imperative, Not a Finance Task

Introduction

In today's economic environment—defined by higher interest rates, inflationary pressure, and ongoing market volatility—cash flow management has become one of the most critical leadership responsibilities in any business.

Cash is no longer just a financial metric. It is operational oxygen.

After more than two decades advising companies through growth, downturns, and transitions, I've seen the same pattern repeat itself: businesses rarely fail because they lack profit. They fail because they lose control of cash.

The uncomfortable truth is this: cash flow problems rarely announce themselves loudly. They build quietly—until options disappear.

Why Cash Flow Matters More Than Ever

Profitability and cash flow are not the same thing. I've worked with profitable companies that ran out of cash, and I've supported loss-making businesses that maintained strong liquidity positions. Understanding this distinction is foundational.

In uncertain times, three factors make cash management particularly crucial:

• Access to capital is tighter and more expensive.  Banks are tightening lending standards, and the cost of debt has increased significantly.
• Customer payment behavior becomes less predictable. During economic stress, even your best customers may delay payments or renegotiate terms.
• Operational flexibility becomes your competitive advantage. Companies with strong cash positions can seize opportunities, negotiate better terms with suppliers, and weather disruptions.

The Foundation: 13-Week Cash Flow Forecasting

If I could implement only one financial practice in a business, it would be the 13-week cash flow forecast. This rolling forecast projects your cash position on a weekly basis for the next three months, updated weekly.

Why 13 weeks? It's long enough to give you strategic visibility but short enough to maintain accuracy. This timeframe lets you see beyond the immediate operational noise while staying grounded in reality.

Here's what an effective 13-week forecast should include:

• Opening cash balance
• Expected cash receipts (broken down by source)
• Expected cash disbursements (broken down by category)
• Net cash flow
• Ending cash balance

The forecast should be prepared by your finance team, reviewed by operations (who often have the best visibility into upcoming receipts and payments), and discussed weekly at leadership meetings.

Accelerating Cash Receipts

The first lever in cash management is accelerating when cash comes in the door. Here are strategies I've implemented successfully:

Payment Terms Review

Review your standard payment terms. Are you offering Net 60 out of habit when your industry standard is Net 30? Every day matters. Consider offering small discounts for early payment—a 2% discount for payment within 10 days can significantly accelerate cash collection and is often cheaper than the cost of capital.

Invoice Immediately and Accurately

This sounds obvious, but I've seen countless companies with delays between service delivery and invoicing. Every day you delay invoicing is a day you delay payment. Implement processes to invoice within 24 hours of delivery or completion.

Equally important: ensure invoices are accurate and complete. Disputed invoices create payment delays. Include clear payment instructions, accepted payment methods, and contact information for questions.

Proactive Collections

Don't wait until invoices are overdue to contact customers. Implement a systematic collections process:

• Confirm invoice receipt within 2-3 days of sending
• Send friendly reminders 5-7 days before due date
• Contact customers on the due date
• Escalate quickly if payment doesn't arrive within 5 days of due date

The key is making collections a routine business process, not an adversarial interaction.

Managing Cash Disbursements

The second lever is managing when cash goes out. This isn't about delaying payments inappropriately—that damages supplier relationships and can hurt your business. It's about being strategic and intentional.

Payment Prioritization Framework

Establish a clear hierarchy for payments:

1. Payroll and benefits: Always the top priority
2. Critical vendor payments: Suppliers essential to operations
3. Debt service: Required loan and lease payments
4. Tax obligations: Government payments with penalties
5. Other vendors: Managed based on terms and relationships

Centralized Payment Authority

During uncertain times, I recommend centralizing payment authority. One person (typically the CFO or controller) should approve all payments. This creates visibility, prevents duplicate payments, and ensures alignment with your cash position.

Negotiate Extended Terms

Talk to your key suppliers about payment terms. Many vendors will extend terms for reliable customers, especially if you're transparent about your situation and demonstrate a track record of payment.

Building a Cash Reserve

The best time to build reserves is before you need them. I recommend maintaining a cash reserve equal to 3-6 months of operating expenses. This provides a buffer for unexpected events and gives you flexibility during downturns.

If you don't have reserves today, start building them systematically:

• Set a target reserve level
• Allocate a percentage of excess cash flow each month
• Keep reserves in accessible but separate accounts
• Define clear criteria for when reserves can be accessed

Scenario Planning

Don't just forecast the expected case—model different scenarios. What happens if your largest customer delays payment by 30 days? What if revenue drops 20%? What if a key supplier demands upfront payment?

Scenario planning helps you prepare responses before crises hit. It also identifies vulnerabilities in your cash position that might not be obvious in baseline forecasts.

Working Capital Optimization

Working capital—the difference between current assets and current liabilities—ties up significant cash in most businesses. Optimizing working capital can free substantial cash without requiring external financing.

Inventory Management

Excess inventory ties up cash. Implement just-in-time practices where possible, improve demand forecasting, and aggressively manage slow-moving inventory. Even small improvements in inventory turnover can free significant cash.

Accounts Receivable Efficiency

Measure your Days Sales Outstanding (DSO)—the average number of days to collect payment. Industry benchmarks vary, but if your DSO is increasing, it's a red flag. Focus on the aging report: receivables over 60 days should receive immediate attention.

Accounts Payable Management

Similarly, track Days Payable Outstanding (DPO). While you want to take full advantage of payment terms, consistently slow payment can damage vendor relationships and lead to restrictive terms or supply disruptions.

When to Seek External Support

If cash management is consuming significant leadership time, or if you lack internal expertise, consider engaging a fractional CFO. An experienced fractional CFO can quickly implement forecasting systems, optimize working capital, negotiate with banks and suppliers, and provide board-level financial leadership without the cost of a full-time executive.

Conclusion

Cash flow management in uncertain times isn't optional—it's existential. The companies that survive and thrive are those that treat cash with the discipline and attention it deserves.

Start with visibility. Implement weekly forecasting. Be proactive about receipts and strategic about disbursements. Build reserves. And remember: in times of uncertainty, cash is confidence.

Need help implementing these practices? Ryezon Advisory provides fractional CFO services to help businesses strengthen financial discipline and navigate uncertainty. Let's talk about your specific situation.