A director's guide to avoiding a cash flow crisis

Crises are rarely sudden

A cash flow crisis feels sudden, but it almost always builds gradually — a slipping debtor days number, a big payment looming, a quiet quarter. The directors who get caught out are the ones not watching; the ones who forecast see the crunch weeks ahead and act while they still have options. The single best defence is a forward look. See how to forecast cash flow.

Know the warning signs

Watch for the tell-tales: customers paying later, your own account creeping toward its limit, relying on next month's income to cover this month's bills, or a stretched current ratio. Each is a signal, not yet a crisis — early enough to fix. Read them in business debt warning signs. Ignoring them is what turns a wobble into an emergency.

Pull the internal levers first

Before reaching for funding, tighten what you control. Chase overdue invoices hard, pause non-essential spend, use supplier terms fully, and clear slow stock. These free cash fast and cost nothing. Improving working capital often closes the gap on its own — see working capital management. Every pound found internally is a pound you don't have to borrow.

Arrange funding from strength

If the gap is real and internal levers won't close it, arrange funding before the pinch, when you're negotiating from strength rather than desperation. A facility set up in calm times, ready to draw, is far cheaper and easier than one scrambled for in crisis. This is the quiet value of planning ahead — funding on your terms, not the lender's worst read of a panicked borrower.

Keep the safety net on the company

The best insurance is a modest cash buffer plus a standby facility you can draw on. Credicorp lends to the company, not to you personally, and takes no personal guarantee, so your safety net doesn't stake your home. Size the combination with the working capital calculator, and read how much cash to hold.