When the economy feels unpredictable to large segments of the public, it’s not uncommon for sales to slow down as people and businesses cut spending, costs to rise as the economy contracts, and lenders to tighten access to credit. Under these conditions, cash flow becomes the lifeline of your business. In a struggling economy, strong cash flow management isn’t just a best practice; it may mean the survival of your business.
At Ensign Partners, we provide business owners a full spectrum of critical advisory services: tax, financial, legal, insurance, and accounting. What sets us apart from other consulting services, however, is that our advisors work in close collaboration with one another.
By identifying where the competing agendas may cause conflicts, we formulate strategies that enable alignment and cohesion. Our recommendations consider the whole picture based on your short and long-term business and personal goals, providing you broad visibility into where your business is going and how to get there.
One of the additional virtues of our business model is that we focus on your particular business and where it’s at; you won’t find cookie-cutter advice or one-size-fits-all solutions. We are always ready to make strategic pivots, and one circumstance that always calls for adjustment is when larger economic conditions impact how you conduct business.
When Cash Flow is King
During uncertain times, cash flow is critical. No matter how strong your assets and fundamentals are, if you are not bringing in sufficient income to operate, your assets are not working for you.
Cash flow discipline does more than keep you afloat. Managed well, it creates stability, positions you to seize opportunities, and reassures investors and customers that your business is strong and resilient. Here are some key tactics business owners can use in this situation to strengthen their cash flow position:
1. Revisit Your Receivables Process
Delayed collections are one of the fastest ways cash flow breaks down. During flush times, it’s easy to get comfortable with laxness. That’s a mistake at any time, but it can be corrected. Tightening up accounts receivable can make a major impact:
- Invoice promptly and consistently: Don’t wait until the end of the month. Send invoices as soon as work is complete.
- Set clear payment terms: If “net 60” is your default, consider shifting to “net 30” or even requiring partial upfront deposits.
- Leverage technology: Use automated reminders and online payment portals to speed up collections.
- Reward early payments: Discounts of 1–2% can incentivize customers to pay sooner, which can be worth much more than the discount given.
2. Negotiate Payables Strategically
Just as you want clients to pay you faster, you should explore ways to extend your own payment terms without damaging supplier relationships.
- Request longer payment windows or staggered payments where possible.
- Batch orders with vendors to qualify for volume discounts.
- Build strong relationships so suppliers see you as a reliable partner and are more willing to extend favorable terms in tough times.
Think of this as the “cash flow teeter-totter”: speeding up collections while slowing down payments creates more breathing room in your books.
3. Cut Costs Without Cutting Growth
In uncertain times, cost reduction is often necessary, but avoid blunt cuts that harm long-term value. Instead, get surgical.
- Audit recurring expenses: Subscriptions, software licenses, and service contracts often hide inefficiencies, and even small cuts can spell the difference between positive or negative cash flow.
- Renegotiate existing agreements: When times are tight, your vendors are probably also facing cash flow issues. To keep you as a customer, they may be open to adjusting terms favorably rather than risk losing your business altogether.
- Outsource strategically: Contractors or fractional professionals may be more cost-effective than full-time hires.
The goal is to run a leaner operation while still maintaining quality production, not just to reduce your budget.
4. Build Recurring Revenue Streams
Cash flow becomes less volatile when more of your revenue is predictable. Some ways to build recurring income:
- Subscription or membership models
- Multi-year contracts with clients
- Automatic renewals on services or support plans
- Service add-ons that tie customers into ongoing relationships
Recurring revenue also increases your business’s valuation, which yields a long-term benefit if you plan to sell or attract investors.
5. Watch Your Inventory Like a Hawk
If your business involves manufacturing or retail, you already know that storing inventory ties up cash. But while having inventory is a business need, excess stock can quietly erode your working capital. Assess your inventory holdings and make necessary adjustments, which may include:
- Shifting to just-in-time models where practical
- Discounting or liquidating slow-moving stock to bring in cash
- Investing in forecasting tools that can help you better match inventory to demand trends
Better inventory discipline can unlock cash that’s otherwise sitting on the shelf.
6. Reassess Debt and Financing Options
During volatile markets, interest rates and lending standards shift quickly. This is the time to be proactive.
- Refinance high-interest debt if favorable terms are available.
- Establish a line of credit before you urgently need it.
- Evaluate financing for large purchases instead of tying up cash all at once.
Strong credit relationships today may provide the cushion you need tomorrow.
7. Model Different Scenarios
Uncertainty means you should plan for more than one outcome. Scenario modeling helps you see how different revenue, expense, or tax assumptions would affect cash flow.
- Project best-case, worst-case, and most-likely outcomes.
- Stress test for revenue declines or cost increases.
- Plan tax payments in advance to avoid surprises.
Integrated planning across financial, legal, and tax disciplines is especially important here. In addition, don’t assume you can pick one strategy and stick with it. As conditions develop and evolve, step back and assess whether the changes you implement help or hinder your operational capabilities, your client and vendor relationships, employee retention, and so on. Survival and success do not have to be mutually exclusive.
There’s Always a Strategy; Ensign Partners Will Help You Develop It
Economic uncertainty may be outside your control, but cash flow is not. By taking steps such as tightening receivables, negotiating payables, streamlining expenses, building recurring revenue, and aligning financing strategies, you can protect your business from short-term shocks and position it for long-term stability.
At Ensign Partners, we understand that cash flow isn’t just numbers on a spreadsheet. It’s connected to your long-term wealth strategy. Our integrated approach ensures every lever of your business is working together to create resilience, even in unpredictable times. If you’re interested in implementing an effective cash flow strategy before uncertainty strikes, contact Ensign Partners to schedule a discovery meeting. Let us show you how “The Ensign Way” can help your business stay strong no matter how the economy rolls.