7 tips to get in front of cash flow challenges

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Cash flow is the lifeblood of any business, which is why it’s so important for owners and managers to keep tabs on how much is coming into and out of the organization. A lack of capital is a warning sign that you ignore at your own peril.

Cash flow problems can come from many sources, including rising inflation and interest rates, labour market constraints, and increases to overhead costs. In today’s economic environment, all of those issues are at play.  

To help you understand and address these pressures, we’ve compiled some tips on how to manage your cash flow and mitigate impacts on your debt obligations.

1. Do a cash flow forecast 

Businesses that haven’t faced a liquidity crunch can find it difficult to change their cash flow management. By moving to a receipts and payments basis, conducting daily forecasting, and integrating short- and medium-term forecasts, you can increase capacity for other financial obligations and build confidence with shareholders and lenders. 

2. Analyze your cash flow projections 

You can determine if your liquidity is sufficient by stress testing your forecasts for different impact scenarios, allowing you to make decisions based on real-time data. This can also help inform an appropriate response to your financial stakeholders, who may be looking for forward looking data. 

3. Communicate with your financial partners 

Cash flow issues can arise despite your best efforts. If forecasting and stress testing show that your business might not be able to meet its debt obligations, it’s important to proactively communicate with your financial institution to discuss your options. Don’t wait until your liquidity reaches crisis levels. Providing your financial institution with as much notice as possible  may give them the knowledge they need to offer some flexibility or help restructure your obligations. 

4. Review temporary finance options 

Other sources of temporary financing might be possible—and these are changing every day. Speak to a business advisor and get advice on the best options for your situation. 

5. Speak with customers and suppliers 

Communicate with your customers and suppliers on a regular basis to get in front of potential cash flow inconsistencies. For example, you can accelerate cash collections by submitting invoices in a timely manner. Consistent, proactive dialogue may also reveal ways to negotiate discounts or introduce flexible payment options. 

6. Get your GST/HST returns in 

Filing timely GST/HST returns can help you access cash sooner if your costs outweigh your revenue. This is common for companies with start-up costs but can also be the case for mature companies because of timing of expenses or unforeseen events. File GST/HST and other remittances on time—even if you can’t turn the payment into cash—as it can help prevent penalties and maintain your business’ financial health. 

7. Consider R&D tax credit eligibility 

If your company has refundable tax credits such as those under the Scientific Research and Experimental Development (SRED) program, filing your corporate income tax return early can help accelerate timely access to this cash. 

Doing business in a volatile time isn’t easy, but we’ll work with you to find the right solution for your business. If you’re looking to improve your cash flow, our advisors can help you find the way forward.