How to Improve Cash Flow Without Cutting Your Workforce

Profit and cash are not the same

A profitable company can still run short of cash if customers pay slowly, inventory sits, or large costs come due before revenue arrives. Cutting staff is a blunt response to what is often a timing problem.

Cash levers, from fastest to slowest

Receivables

Invoice on delivery rather than at month end, offer electronic payment, follow up at set intervals, and review credit terms for slow payers. Days sales outstanding (DSO) is the metric to watch.

Payables

Negotiate terms that match your collection cycle. Pay on the due date rather than early unless there is a discount worth taking.

Inventory

Identify slow-moving stock and reduce reorder points where service levels allow.

Recurring cost structure

Costs that recur every pay cycle affect cash continuously. Employer payroll taxes are remitted on a deposit schedule set by the IRS, so any structural change to taxable wages is felt in cash quickly. Learn how employer payroll taxes work and how pre-tax benefits interact with them.

Build a 13-week cash forecast

A rolling 13-week forecast of receipts and disbursements shows problems early enough to act without drastic measures. Update it weekly and compare forecast to actual so it becomes more accurate over time.