Many businesses that close were profitable on paper; they ran out of cash. Profit is what your accounts say you earned. Cash is what is in the bank to pay salaries, rent and suppliers this month. A cash gap usually shows warning signs weeks before it hurts. This article sets out seven of them, a practical fix for each, and a weekly check that takes 15 minutes.
1. You check the bank balance before paying bills
If paying a supplier depends on what is in the account that day, you are reacting to cash rather than planning it.
Fix: keep a 12-week cash forecast and update it every week. It shows the tight weeks early, while you can still act.
2. Customers are paying later than before
Payments that used to arrive in 30 days now take 45, then 60. Each extra week of waiting is cash your business is lending to customers at no charge.
Fix: track your average collection days every month. Send reminders before the due date, not after it. Ask for deposits on larger jobs.
3. Sales are growing, but the bank balance is not
Growth uses cash. You buy more stock and hire more staff before customers pay you. A record sales month can still leave you short.
Fix: before accepting a large order, work out how much cash it needs up front and when the money comes back. Ask for deposits or progress payments where you can.
4. You use credit to cover regular costs
Paying salaries or rent with an overdraft or credit card, month after month, shows the business is spending faster than it collects.
Fix: list your fixed monthly costs and build a cash buffer over time, ideally two to three months of those costs.
5. Stock is piling up
Slow-moving stock is cash sitting on a shelf. It also costs storage space, and some of it may never sell.
Fix: review stock every month. Examine anything that has not sold in 90 days, and clear it with bundles or discounts before buying more.
6. Large payments keep catching you by surprise
Annual insurance, tax instalments, licence renewals and year-end or Chinese New Year bonuses are all known in advance. They still drain cash when nobody has planned for them.
Fix: put every known lump-sum payment on a 12-month calendar, and set aside a monthly amount for each one.
7. You do not know your break-even number
If you cannot say how much you need to sell each month to cover your costs, it is hard to tell whether a slow month is a problem or normal.
Fix: divide your monthly fixed costs by your gross margin. With fixed costs of RM40,000 and a 40% gross margin, you need RM100,000 in sales each month to break even.
A 15-minute weekly habit
Once a week, check four numbers: your bank balance, money due from customers in the next four weeks, bills due in the same period, and your forecast balance at the end of it. Most cash problems become visible this way long before they become a crisis.
Where to start
- Build the 12-week forecast first. Every other fix depends on seeing the next three months.
- Calculate your break-even sales figure this week and compare it with the last three months of actual sales.
- Put every lump-sum payment for the next 12 months on one calendar.
- Measure average collection days now, so you have a baseline before you change your reminder process.
Get your cash flow under control
Our Cash Flow & Budget Setup (RM1,200) reviews your income and expenses, builds a 12-month cash flow forecast and a monthly budget template (Excel or Google Sheets), and shows you how to keep both up to date. Book your cash flow setup