5 Signs Your Cash Flow is About to Break (And The Immediate Fixes)

Root Causes:

1. Cash Flow Timing Mismatch: Money going out faster than it comes in
2. Insufficient Reserves: No cash buffer for timing differences
3. Poor Cash Flow Forecasting: Not seeing problems coming
4. Over-Optimistic Revenue Projections: Expecting payments that don’t arrive
5. Growing Too Fast: Expansion consuming cash faster than it generates

The Math:

• If you’re paying suppliers in 30 days but customers pay in 45 days
• You have a 15-day cash gap to fund
• On RM500K monthly sales, that’s RM205K you need to fund
• Without reserves or financing, you’re constantly juggling

The Risks:

1. Personal Financial Risk: Putting your personal assets at risk
2. High Interest Costs: Emergency loans often have high rates (15-30%)
3. Temporary Fix: Doesn’t solve underlying cash flow problem
4. Debt Spiral: One loan leads to another
5. Stress and Burnout: Constant financial pressure

The Reality:

• If you’re using personal funds, your business isn’t generating enough cash
• This is a symptom, not a solution
• You need to fix the business, not fund it personally

1. Cash Runway

Cash Runway = Current Cash Balance / Monthly Cash Burn

Example:
Cash Balance: RM200K
Monthly Burn: RM50K
Runway: 4 months

Red Flag: Less than 3 months runway

2. Cash Flow Trend

• Positive Trend: Cash increasing month-over-month ✅
• Flat Trend: Cash stable but not growing ⚠️
• Negative Trend: Cash decreasing month-over-month ❌

3. Operating Cash Flow

Operating Cash Flow = Cash from Operations

Positive: Business generating cash ✅
Negative: Business consuming cash ❌

Red Flag: Negative for 3+ consecutive months

4. Working Capital Ratio

Working Capital = Current Assets - Current Liabilities

Positive: More assets than liabilities ✅
Negative: More liabilities than assets ❌

Red Flag: Negative working capital

Days 1-2: Assess the Situation

1. Calculate current cash balance
2. Review accounts receivable aging
3. Identify all upcoming payments (next 30 days)
4. Create 90-day cash flow forecast
5. Determine cash runway

Days 3-5: Accelerate Cash In

1. Call all overdue customers
2. Send invoices immediately (if delayed)
3. Offer early payment discounts
4. Consider invoice factoring for immediate cash
5. Negotiate progress payments on large projects

Days 6-7: Delay Cash Out

1. Negotiate extended payment terms with suppliers
2. Delay non-essential expenses
3. Prioritize critical payments only
4. Use credit cards strategically (if you must)
5. Consider payment plans for large expenses

Build Cash Flow Management Systems:

1. Weekly Cash Flow Reviews: Monitor cash position weekly
2. 90-Day Rolling Forecasts: Always look 3 months ahead
3. Early Warning System: Alerts when cash falls below threshold
4. Automated Collections: Systematize payment follow-up
5. Regular Expense Reviews: Quarterly cost optimization

Build Cash Reserves:

1. Set Reserve Target: 3-6 months operating expenses
2. Save Consistently: 10-20% of profits to reserves
3. Separate Accounts: Keep reserves separate from operating cash
4. Don’t Touch Reserves: Only for true emergencies
5. Rebuild After Use: If you use reserves, rebuild immediately

Set These Alerts:

1. Cash Balance Alert: When cash falls below 2 months operating expenses
2. DSO Alert: When DSO increases by 5+ days month-over-month
3. Receivables Alert: When receivables grow faster than sales
4. Negative Cash Flow Alert: When operating cash flow turns negative
5. Runway Alert: When cash runway falls below 3 months

Action Triggers:

• Yellow Alert: Monitor closely, take preventive action
• Orange Alert: Implement immediate fixes
• Red Alert: Emergency measures required

Phase 1: Assessment

• Current cash position analysis
• Cash flow forecast review
• Working capital optimization assessment
• Early warning system evaluation

Phase 2: Immediate Stabilization

• Accelerate collections
• Optimize payment terms
• Reduce non-essential expenses
• Establish emergency financing if needed

Phase 3: System Implementation

• Build 90-day rolling forecasts
• Implement automated collections
• Create early warning system
• Establish cash flow review process

Phase 4: Long-Term Optimization

• Build cash reserves
• Optimize working capital
• Improve cash conversion cycle
• Maintain 3-6 months runway