In good times, most business owners naturally focus on growth—bringing in more customers, launching new products or services, acquiring other small businesses, or otherwise increasing revenue. However, when times get tough, whether from an economic downturn or a business-specific challenge, those same instincts can leave blind spots. 

What often gets overlooked is the balance sheet—the lifeblood of your company’s day-to-day survival. That’s where cash flow management takes the mainstage. Cash is king, as the saying goes, and in uncertain times, businesses that keep a close eye on it will be the ones that weather the storm. The good news? With the right strategies, not only can you protect your cash flow during a crisis but also use it to come out stronger on the other side.

1. Strengthen Your Accounts Receivables Process and Payment Terms

One of the fastest ways to improve liquidity is to get paid faster. Many businesses still operate on 45-60 day payment cycles, but during a crisis, that lag can be crippling. 

Shortening accounts receivable days to 15 or 30 is a game-changer. It reduces the risk of cash shortfalls and limits your reliance on credit lines. The key is to: 

• Build relationships with your customer’s accounts payable team. 
• Make sure that before you send invoices, all information is clear, correct, and easy to process. 
• Set and enforce a firm AR policy (e.g., services may pause if invoices aren’t paid on time). 
• Consider offering discounts for early payment.  

Clients usually respect clear boundaries, and you’ll gain peace of mind knowing your cash is flowing in with more predictable customer payments.

2. Be Proactive About Accounts Payable Terms

Cash flow isn’t just about when you collect; it’s also about when you pay. During a downturn, don’t be afraid to revisit terms with both customers AND suppliers. 

That might mean asking suppliers for flexibility on payables. The goal isn’t to squeeze anyone but to create stability and predictability in your cash cycle.

3. Use Forecasting as Your Roadmap

Think of cash flow forecasting as your GPS in uncertain times. It shows where you are in real-time, where you’re headed, and possible detours that may be necessary along the way. 

• Short-term forecasts (6–13 weeks) help you plan for immediate needs like payroll and vendor payments. 
• Long-term forecasts (1–5 years) let you see how major investments—like hiring, equipment, or expansion—fit into your overall risk tolerance. 
• Scenario planning allows you to use your forecast to test both best- and worst-case situations so you’re not caught off guard by fluctuations like a big client leaving or a major opportunity suddenly arriving.  

Without a forecast, you’re making decisions based on gut feelings. With one, you’re making data-backed decisions that give you confidence—even in chaos.

4. Rethink Investments and Costs

Crises have a way of forcing us to reassess priorities. Look closely at your business spending and vendor agreements. Which capital investments can be delayed or scaled back? Which vendor contracts can be renegotiated? 

Cutting for the sake of cutting can be dangerous—but adjusting cash outflows based on your forecast helps you see what truly supports your survival and future growth.

5. Lean on Your Banker Before You Need To

Your lender should be more than someone you call when you’re in trouble. Build that relationship now before you need to leverage it.  

Talk openly about your liquidity position and discuss your company’s creditworthiness. We advise clients to secure a line of credit before they need to use it. Securing a line while your business is in a state of great growth increases the likelihood of a competitive interest rate. Better yet, see if you can get a two-year cycle instead of the usual one-year renewal. It provides stability and gives you one less thing to worry about when the unexpected happens. Waiting until the worst happens may leave your business in a bind if your business’s financial health has been impacted by crisis. 

6. Adjust Inventory Levels

Excess inventory ties up valuable cash on hand. Use inventory management to align stock with customer demand. 

• Review books to ensure accuracy. 
• Compare inventory levels to actual customer purchases. 
• Reduce planned purchases if demand is slowing. 

This frees up cash inflows and improves liquidity.

7. Adjust Staffing Levels

Labor costs are one of the largest operating expenses. Evaluate staffing in line with customer needs. 

• Reduce reliance on contractors where possible. 
• Consolidate roles to streamline business operations. 
• Right-size staff if necessary to preserve the bottom line. 

Making these tough decisions helps increase cash flow in the short term.

8. Build (and Protect) Your Cash Reserve

If forecasting is your GPS, a cash reserve is your safety net. A well-funded reserve helps you navigate downturns without panic—and seize opportunities with confidence. We recommend keeping 10–30% of annual revenue set aside. 

• 10% usually covers about two months of expenses. 
• 30% stretches closer to six months. 

The right number for you depends on your risk tolerance and how stable your cash position is. High-growth companies or those with volatile revenue streams should lean toward the higher end. 

A few additional best practices related to cash reserves and planning: 

• Keep three accounts: operating, reserve, and tax. 
• Only keep about two payrolls of cash in your operating account—stash the rest in reserves. 
• Use an interest-bearing account like a money market or high-yield savings so your cash reserves work for you. 
• Secure a line of credit equal to your reserve, if possible, for extra flexibility. 

The Bigger Picture 

Managing cash flow isn’t just a survival tactic. Done right, it’s a growth strategy. Businesses that actively monitor receivables, use forecasting, and build reserves aren’t just protecting themselves in a crisis—they’re putting themselves in position to make informed decisions that accelerate their business once the dust settles. 

A downturn can feel overwhelming, but it also forces clarity. By focusing on liquidity today, you give your business the breathing room it needs to adapt, invest wisely, and thrive tomorrow—even in a crisis. 

Looking for the exact methodology we suggest to our clients for accurate cash flow forecasting? Check out our eBook with all of our best tips and advice. Download below.