Aug 13, 2025
When a business is faced with declining or inconsistent cash flow, it can be exposed to a number of risks that can threaten its long term viability. To allow them to effectively identify and address cash flow challenges, it is imperative leaders take a comprehensive approach, closely analysing revenue streams, scrutinising spending for efficiency, reviewing cash handling practices, and ensuring the accuracy of financial projections.
Below, 14 members of the Forbes Business Council share key strategies and considerations leaders can use to diagnose cash flow issues and work toward greater financial stability.
Identification of the root cause is key. Conducting a detailed review of financial records such as receivables, payables, and inventory controls is vital. This analysis will help show inefficiencies, payment delays, or surplus inventory, allowing for tailored strategies to enhance cash flow and strengthen overall financial stability. – Lee Blakemore, Introhive
When evaluating cash flow problems, it's important to examine the cash conversion cycle (CCC) which is the amount of time needed for a business to purchase raw materials, produce finished products, sell them, and receive payment. This metric offers valuable insight into how efficiently a company manages its working capital and how effectively it turns operations into cash. – Bradley Saveth, SupplyCaddy
The use of a cash flow dashboard is essential if you want to get a clear understanding of any problems you may be facing. Start by forecasting incoming payments over the next few months, and do the same for outgoing payments. Then, incorporate fixed expenses like payroll and rent to get a clear view of your weekly or monthly net cash position. From there, align your vendor payment terms with your customer payment timelines to minimise cash gaps. Additionally, revisit your pricing strategies to ensure they support healthy cash flow -Thomas Johnson, Southport Marketing, Inc.
One key metric I closely monitor is the labour efficiency ratio. We've identified the ideal range for this number. When it drops too low, it's a strong indicator that cash flow problems are imminent or already occurring. It’s a straightforward calculation that shows whether your staffing costs are out of line with the revenue and workload your business is handling.– Melanie Ammerman, VaVa Virtual Assistants
Cash flow challenges are often the result of late customer payments. One thing that must be monitored carefully is the number and value of invoices that are past their payment date. Make a point of sending timely and courteous reminders to clients whose balances are overdue. It's also imperative that invoices are sent out promptly and that you ensure any late payments are regularly followed up.
Analysing data can uncover valuable insights into cash flow challenges and help you work out practical and effective solutions. By reviewing up-to-date financial records and identifying patterns, a business can pinpoint potential causes of cash flow problems. This may well involve reviewing income and expenditure, checking liquidity ratios on the balance sheet, or evaluating the overall levels of debt within the company.– Neha Naik, RecruitGyan
When looking at the reason for and resolving any cash flow problem it is vital that you review the accounts receivable process. Review your invoicing practices, collections strategy, credit policies, and client relationships, and put a cash flow forecasting system in place. Strengthening these areas can significantly improve cash flow and contribute to greater financial stability.– Alexander Westgarth, WineCap Ltd
It’s important to assess the timing of money coming in and going out. Knowing when expenses are due and when income is expected allows you to spot potential shortfalls and take action. This might include accelerating receivables or negotiating longer payment terms to better align cash flow. – Salvador Ordorica, The Spanish Group LLC
Cash flow is the heartbeat of every small business because it means operations are able to run efficiently while giving you the opportunity to pursue growth investments. Cash flow forecasts allow you to predict cash flow shortages and work proactively to address these issues before they become a problem. Understanding where your cash flow is allows you to make smart decisions around resource allocation and make the most of any growth opportunities - Francisco Ramirez, The ACE Group (TAG)
When looking at cash flow problems take a look at your strategy for the payment and collection of invoices so you can reduce the chances of delays that result in your cash flow being negatively impacted. It is important that payment terms are easy to understand, discounts are offered for early payments and that clients who don’t pay on time are followed up quickly, automated reminders are perfect for this. Also make sure you regularly review expenditure, reduce unnecessary spending and scale responsibly-
It is essential that a good balance is achieved between sales and expenses. If there is more cash coming in than going out a business is not going to go bankrupt. As part of your cash flow analysis, assess whether each unit of product or service sold generates enough profit to contribute to overall financial stability. Alternatively in the manufacturing industry if cash needs to go out first then it is imperative you are fully aware where the break even point is in your business plan.
If you are struggling with cash flow problems one thing you should do is take a close look at your expenses. Focusing on areas where changes can be made will improve your chances of resolving issues, and one of these is your list of expenses. It is imperative that you look closely at where money is being spent in the business, and get rid of unnecessary spending or waste.
Stay aware of your cash position at all times throughout the month. Monitor the status of accounts payable, receivable, and outgoing payments, are they on track, falling behind, or ahead of schedule? Review your assets as well: if a sudden cash need arises, how quickly can you convert assets into cash? Consider any unrealised losses that may need to be recognised. Make it a habit to meet regularly with your finance team to review and discuss these areas.
While profit often gets the spotlight in business, failing to pay suppliers, employees, or taxes on time can quickly lead to serious trouble, especially for small businesses. You could find yourself without the resources to operate. The key? Shift your focus from just profitability to minimising the gap between incoming cash and outgoing expenses.
