Respond to a business cash crisis

---
name: respond-to-a-business-cash-crisis
category: money
description: Respond to an acute business cash crisis through verified liquidity, lawful payment priorities, controlled actions, communications, and recovery monitoring. Use when payroll, tax, critical suppliers, debt, or minimum cash may fail soon.
---

# respond-to-a-business-cash-crisis

Establish the true cash position, protect restricted funds and people, and route every high-impact action through authorized legal and financial review.

## When to use

- Use when available cash may not cover near-term payroll, taxes, debt, refunds, critical suppliers, regulated reserves, or essential operations.
- Use normal cash forecasting when obligations remain covered and no accelerated decision structure is needed.

## Preconditions

- Name an incident lead, finance owner, payment authority, legal or insolvency adviser as required, communications owner, and decision cadence.
- Secure read-only bank, processor, ledger, receivable, payable, payroll, tax, debt, contract, and forecast evidence.
- Separate unrestricted operating cash from client, trust, escrow, grant, deposit, payroll, tax, or otherwise restricted funds.

## Procedure

1. Establish **cash position and runway** from verified bank balances, in-transit settlements, restricted amounts, approved facilities, and daily receipts and payments.
2. Build a dated obligation list covering payroll, taxes, benefits, customer funds, refunds, debt, rent, utilities, insurance, critical suppliers, purchase commitments, and legal duties.
3. Define **payment priority and authority** with qualified legal, tax, employment, and insolvency advice for the relevant jurisdictions.
4. Freeze unapproved spending, new commitments, distributions, related-party transfers, and nonessential cash movement without disrupting evidence or critical controls.
5. Validate collections by amount, probability, documentation, dispute, payment route, and earliest realistic date; do not coerce or misrepresent.
6. Inventory **liquidity actions** including collections, expense deferral, purchase cancellation, inventory release, asset finance, owner capital, lender waiver, facility draw, customer prepayment, and formal restructuring.
7. Quantify each action's cash value, certainty, timing, permission, cost, dependency, reversibility, and harm to customers, workers, suppliers, or continuity.
8. Construct base, downside, and severe daily cash cases with minimum-cash, payroll, tax, covenant, and shutdown thresholds.
9. Obtain recorded approval for payment decisions, deviations, lender contact, employment actions, and use of any restricted or disputed amount.
10. Conduct **stakeholder communications** with factual, role-specific updates for workers, customers, suppliers, lenders, investors, advisers, and regulators where required.
11. Monitor actual cash daily, reconcile forecast variances, re-rank actions, and trigger formal restructuring or insolvency processes before options disappear.
12. Move from stabilization to a funded recovery plan with revised economics, controls, governance, and recurrence prevention.

## Failure plan

- Never use restricted client, trust, payroll, tax, or escrow funds for general operations without explicit lawful authority.
- Never delay earned wages, mandatory taxes, regulated obligations, or protected claims based solely on management preference.
- If the executive proposing an unlawful or harmful transfer also controls payment access, seek bank restrictions and dual authorization, preserve the instruction, and escalate through independent directors, an audit committee, protected reporting, and qualified counsel.
- If records conflict, use the lowest verified available-cash figure until reconciliation resolves the difference.
- If directors may face insolvency duties or personal exposure, stop informal prioritization and obtain qualified local advice immediately.
- Preserve evidence of balances, decisions, approvals, forecasts, and communications even under time pressure.

## Worked example

A company has payroll due in 12 days, a late major customer, a near-breached lender covenant, tax and supplier payments due, and noncancelable inventory orders. The founder proposes delaying wages and moving restricted client funds. The response excludes restricted funds, obtains employment and insolvency advice, and ranks obligations under approved authority. Daily scenarios show payroll coverage only if a documented collection and lender waiver arrive by defined dates. The company requests the waiver, negotiates supplier timing, freezes discretionary purchases, communicates verified facts to affected groups, and sets an earlier restructuring trigger if either dependency fails.

## Done

- A daily cash and obligation register proves unrestricted cash position and runway, receipts, payment priority and authority, restrictions, thresholds, owners, and reconciliation status
- A liquidity decision log records each action, value, timing, permission, dependencies, stakeholder effects, approval, execution, and result
- A stabilization and recovery plan verifies stakeholder communications, forecast variance, lender and adviser status, escalation triggers, funded actions, and control remediation