Insufficient cash

Shortage of cash is a ‘normal’ problem for a company in the Baby stage of corporate evolution (or a start-up). It requires the continued dexterity of management to deal with it.

However when a more mature company has cash problems this will be far more serious. suggesting a Strategic issue.

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Depth of problem

Cash issues sit at the Money concern stratus, level 2 of the problem causality chain of the Problem Depth Chart.

When a more mature company has cash problems this will be far more serious. suggesting a Strategic issue (level 3) or an Accountability issue (level 4) or even a Mood of a key Individual problem (level 5).

What you can do now for free

If the insufficient cash is a Baby stage problem, you must stretch your payables to the extreme. Specifically, talk to each supplier, one at a time, to negotiate delayed terms of payment. Most will be cooperative if you take the time to talk to them. If you can, borrow cash from friends and family or get a loan from a bank.

If a more mature company has cash problems, you do need to isolate the cause:

-lack of sales: then chase and obtain ‘easy’ sales

-lack of planning: then lay out a detailed weekly or daily cash flow plan

-lack of sufficient accountability: then clearly define who is responsible for what

-irresponsible executive behaviour: then bring the individual to account quickly.

What you can do now for a low cost

In all cases, cash shortages must be addressed quickly. Once the immediate shortfall is resolved by some emergency measure, Volume III will explain what are normal problems for companies depending upon what stage of evolution they are at, and likewise which problems are abnormal and can destroy the enterprise. For example, negative cash flow is normal at the Baby stage but abnormal at a more mature stage, such as Nobility. Volume III then suggests how to repair the damage at each of ten stages of evolution – a different solution for each.

If the solution to your specific issue is not identifiable in Volume III consider jumping into an intensive problem-solving mode outlined in Volume V.

If the problem is really deep seated you may need a strategic realignment of your company as described in Volume IV.

What CCCC feels you should really do

For a Baby or near start-up company, hire an experienced cash flow consultant or accountant to monitor daily cash.

For a larger organization, realize that cash shortages have to be addressed urgently. Set up an Annual plan meeting quickly to deal with this specific cash flow issue. View this planning as an immediate short-term approach. For the longer term, you need to identify the major issues confronting the company. Consider introducing the 20% Solution which addresses the five worst issues of the enterprise.

For a truly deep-seated, solution, institute a 3-day Strategic Alignment Retreat (SAR) to get to the bottom of the issue and isolate whether it is at level 3, 4 or 5 issue – or all three.

Related Problem Domains:  Financial | Production & Operations

Problem Depth Chart