Distress & Turnarounds

Stabilizing Cash First

In the first month of a crisis there is exactly one job: know the date you run out of money, then move it. Everything else you want to fix depends on being there to fix it.

  • Intermediate
  • 9 min total
  • 12 chapters

What decision this helps you make: What to do in the first five days of a cash crisis — and specifically which payments to make, delay, or refuse this Friday.

What this topic is

Cash stabilisation is the opening phase of every turnaround: build a week-by-week forecast of money in and money out, find the date the balance goes negative, and take the specific actions that push that date further away. It is a liquidity exercise, not a profitability exercise, and the two are deliberately kept apart.

Why it matters

Almost every restructuring option — a sale, a refinancing, a lender negotiation, an orderly wind-down, a genuine operational fix — needs weeks or months to execute. Options do not disappear because a business is unprofitable. They disappear because it runs out of money before the option closes. Weeks of runway are the currency every other move is bought with.

Who should learn it

Owners and managers in the first weeks of a cash crisis, finance leads asked to produce a forecast a lender will accept, and advisers who need a defensible sequence rather than a list of good ideas.

What you will understand

  • How to build a 13-week forecast from invoices and payment dates rather than from the income statement
  • The order in which obligations must be paid, and the two categories that are never deferred
  • The five levers that move the run-out date, ranked by speed and by what they cost you later
  • Why fixing profitability first is the most common and most expensive sequencing error

Prerequisites

Common misconception

"We need to fix the losses — the cash problem is a symptom." Almost the opposite, in the short run. A business can be structurally profitable and die in six weeks; a business can be losing money and survive for years. Profitability determines whether the company deserves to exist. Liquidity determines whether it gets the chance to prove it. In the first month you work the liquidity problem exclusively, because every profit fix you can name takes longer to bite than the runway you have.