5. Cash Is King - How to Strengthen Your Cash Flow in Tough Times

Practical guidance on cash flow forecasting, liquidity and managing receivables

1. Introduction

Cash flow is the lifeblood of any business. In good times, it’s easy to overlook. In uncertain times, it quickly becomes the difference between survival and shutdown. When sales slow or costs rise, a strong cash position gives you breathing space, decision-making power and peace of mind.

This article belongs to Pillar 2 - Protecting Your Business. It focuses on how to strengthen cash flow, not just through cuts, but through clarity. We'll cover how to forecast with purpose, manage receivables and maintain enough liquidity to withstand a lean period.

2. Representative Narrative

Tania runs a small café in Rotorua. Over summer, business was steady. But winter has brought a drop in foot traffic, rising supplier prices and late payments from a few catering clients. She still has a loyal customer base, but cash is getting tight.

Last year, she could absorb the ups and downs. Now, she’s worried about meeting payroll by the end of the month. A friend referred her to John Luxton, a business advisor at RegenerationHQ. Tania wasn’t sure what advice would help, but what she really needed was a clear look at her position.

John helped her lay out a 12-week cash flow forecast. “You’re not in crisis,” he said, “but you are running without visibility. Let’s fix that.”

3. Recommended Actions

• Build a rolling 12-week cash flow forecast
  Start with what you know - incoming sales, fixed costs and due bills. Even a rough forecast is better than guessing. Update it weekly.

• Separate profit from cash
  You might be profitable on paper but still run out of money. Profit includes unpaid invoices and future bookings - cash flow reflects what is actually in the bank.

• Chase aged receivables
  Identify invoices older than 30 days and follow up. A friendly reminder often works. Offer payment plans if needed, but do not ignore delays.

• Talk to your bank early
  If you expect a shortfall, have the conversation before you're out of time. Many banks are more flexible with clients who are proactive and informed.

• Limit unnecessary spending
  Put a hold on non-essential purchases. Delay discretionary upgrades. Question each expense - is this helping me preserve cash, or draining it?

4. Expected Outcomes as Narrative

Tania followed John’s suggestion and created a basic forecast in a spreadsheet. It showed a dip in early August due to supplier bills and GST. By contacting three overdue catering clients, she collected $6,000 in unpaid invoices.

She also negotiated an extended term with her coffee bean supplier and paused a planned equipment upgrade. Her bank, reassured by her forecast, approved a temporary overdraft extension.

The café was still under pressure, but now Tania knew where she stood. With more predictability, she stopped feeling like every decision was a panic. Her staff noticed the shift too.

5. Red Flags & Mitigating Strategies

Red Flag 1 - Relying on your bank balance as your only metric
Mitigation -  Forecast weekly to understand future inflows and outflows

Red Flag 2 - Allowing receivables to build up without follow-up
Mitigation -  Assign someone to check and chase overdue invoices every week

Red Flag 3 - Cutting costs that damage core business functions
Mitigation -  Identify and protect your essential revenue drivers

6. HR Best Practice

Cash flow pressure can lead to difficult staffing decisions. Handle them with fairness and transparency.

• Communicate early if hours may be reduced

• Explore voluntary leave or reduced days before forced cuts

• Be honest about the situation — staff are more understanding when they know the why

• Maintain morale with recognition and clarity, not silence

John often says that people can cope with hardship if they feel respected and informed. The worst damage comes from being kept in the dark.

7. Psychological Perspective

Running a business with tight cash flow is mentally exhausting. It can feel like there’s no room to breathe. That anxiety, if unspoken, can cloud judgement and create emotional distance from your team.

John encourages owners to talk through the numbers with someone trusted. Even the act of naming the problem can make it more manageable. You don’t need to have it all figured out. You just need a plan that gets you through the next four weeks.

8. Recommended Owner's Mindset

This is a time for calm clarity. Let go of guilt or perfection. Instead, focus on informed action. Having a clear, simple view of your financial position, even if the news isn’t good - is always better than uncertainty. Clarity is power.

9. Reflective Questions for the Owner

• Do I know exactly how much cash is available over the next 4–6 weeks?

• Am I confusing sales volume with available funds?

• Which expenses can be paused without harming operations?

• Are my clients paying on time — and if not, what have I done about it?

• Have I asked for help before it becomes an emergency?

10. Suggested Ongoing Actions

• Update your 12-week forecast every Friday

• Follow up overdue invoices weekly

• Review your bank facility limits and repayment terms

• Set a minimum cash buffer goal for your business

• Book a quarterly check-in with a financial advisor or with someone like John Luxton to review your position and refine your forecast

Critical Takeaway - Profit is theory - cash is reality - if you don’t know your next four weeks of cash, you’re flying blind.

If you’d like a confidential, free of charge, free of obligation conversation about your business, here’s how to get me.

📞 Phone +64 275 665 682
✉️ Email john.luxton@regenerationhq.co.nz
🌐 Contact Form www.regenerationhq.co.nz/contact

If you’d like to read more RegenerationHQ thinking on SME business and other things, go here – www.regenerationhq.co.nz/articlesoverview

🔹 RegenerationHQ Ltd - Business Problems Solved Sensibly.
Supporting NZ SME Owners to Exit Well, Lead Better and Build Business Value.