It is often said that “cash is king” in the corporate world, since it’s the lifeblood of any organization. Without cash, an enterprise will soon perish, as it can’t pay its critical suppliers, its employees, or meet its government remittance obligations. In small organizations, this phrase is especially true, since cash is often in short supply. When cash is tight, what can be done to preserve it for as long as possible? Fortunately, there are several strategies that be used to alleviate a short-term cash crunch.

Are you paying too quickly?

You can start with your payables policy. Perhaps you currently pay your vendor bills soon after they are received. Instead, you could take advantage of the payment terms most vendors offer. In many cases, the default terms are “net 30”, meaning that the balance is expected to be paid within 30 days of the invoice date. Taking advantage of a vendor’s payment terms allows you to free up cash so you can make your critical payments (government, payroll, essential vendors) today.

Are you getting paid on time?

Reviewing your accounts receivable is also a good idea. If you make sales on credit (as opposed to receiving payment immediately at the time of sale), you most likely have cash out there in the world that hasn’t crossed your front door yet. Review your accounts receivable records to see if there are any accounts that are older than your standard payment terms and contact that customer to ask for payment. Ideally, this should be done at least once a month, but being busy running the day-to-day of your organization, this task understandably may fall by the wayside (it can also feel awkward to ask for money, especially if it’s a long-time and likeable customer). If you often find yourself in a cash crunch, you could consider tightening your payment terms (i.e. changing from “net 30” to “net 15”) so that customers pay their bills sooner.

Are you forecasting cash flow?

To anticipate your cash needs, it also would help to do a simple cash forecast. Some accounting software packages offer cash flow planners (Quickbooks Online, for example), which help tremendously in giving a good estimate of when you might face a cash shortfall. If you don’t have such software, you can still perform a basic forecast in a spreadsheet (like Microsoft Excel or Google Sheets). You can start with your current cash balance in one cell, and then in chronological order, list your expected cash receipts and disbursements. While it may not be precise (no forecast is), this exercise will give you a good idea about when you may need to take corrective action.

Operating a small business or not-for-profit can be like a 24/7 firefighting operation, and keeping a steady eye on your cash balance may not be at the top of your priorities. Reviewing your accounts payable and receivable policies, as well as doing some basic forecasting, can help you take one worry off your mind.