Manage cash timing and liquidity

Direct answer

Start with cash the business can use, then place likely receipts and required payments on their expected dates. The lowest projected balance shows when action is needed. If there is a credit facility, check its borrowing availability and covenant terms separately.

Why this question comes up

Reported profit can coexist with a cash shortage. An unpaid customer invoice cannot cover payroll due this week. Use payment history alongside invoice terms when forecasting receipts.

Records to gather

• Current bank balances and any restricted or reserved amounts
• A/R aging with observed collection behaviour by customer
• A/P aging with due dates and available terms
• Payroll and tax calendars with exact dates
• Credit facility terms, availability, and covenant tests, if applicable

Review workflow

1. Confirm available cash. Reconcile bank balances and exclude funds that cannot be used. Show any management cash buffer separately from legally or contractually restricted funds.
2. Date the cash movements. Place expected collections, payroll, taxes, debt service, and supplier payments in the weeks they are likely to occur. Use shorter intervals around a tight payment date.
3. Test uncertain receipts. Show a delayed-collection case for major invoices rather than assuming every customer pays on the due date.
4. Find the low point. Identify the date and amount of the lowest balance, then compare it with the time needed for lawful options such as collection follow-up or an existing credit draw.
5. Check financing terms. If a facility is part of the plan, verify remaining availability, draw conditions, and any covenant headroom. Ask a qualified adviser before changing required payment dates.

What a useful answer should include

• Available cash after restricted amounts, stated as of a date
• Receipts and payments placed on expected dates through the relevant decision horizon
• The lowest projected balance and the date it occurs
• Uncertain receipts shown in a delayed case
• Lawful options and their lead times, without assuming payments can be postponed
• Covenant thresholds and headroom, if there is a credit facility

Common failure modes

• Using monthly totals alone. A positive month can still contain a week when a payment cannot clear.
• Treating all reserves alike. Contractually restricted funds and a management buffer need separate treatment.
• Assuming invoices pay on time. Use payment history and a delayed-receipt case.
• Assuming credit is immediately available. Check draw conditions, available amount, and lender timing before relying on it.