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How to anticipate and manage urgent cash requirements?

How to anticipate and manage urgent cash requirements?

Temps de lecture : 4 minutes

An urgent cash requirement is a situation in which a company is faced with a lack of liquidity to meet its immediate expenses. This may be due to a sudden drop in revenues, late payment by customers, etc. To alleviate this urgent need, company managers need to find a source of financing quickly. In this article, we take a look at possible financing solutions.

Why does a company need urgent cash?

There are a number of reasons why a company may urgently need cash, usually linked to an imbalance between cash inflows and outflows. Here are some examples of possible causes:

The unexpected

The unexpected can additional expenditure or lower revenues. Such situations can jeopardize a company's cash flow if it has not built up sufficient reserves or savings. The company must then rapidly mobilize available cash or find emergency financing solutions.

A growth crisis

It translates into sudden and significant fluctuations in demand for its products or services. If demand suddenly drops, the company may find itself with excess inventory and insufficient cash to meet its other financial obligations. The other way around, a sudden increase in demand may require rapid investment to boost production.

Pressure from your suppliers

This is a situation where the company's suppliers no longer grant or reduce payment terms This may be due to a lack of confidence in the company's creditworthiness. This may be due to a lack of confidence in the company's creditworthiness, a desire to preserve their own cash flow, or increased competition in the market. As a result, the company must pay for its purchases more quickly or on less favorable terms.

Poor cash flow management

This may be due to a lack of skills, time or resources. This means that the company cannot anticipate potential cash needs or surpluses, or adapt its decisions accordingly. It can find itself in critical situations where it has to meet urgent needs without having the necessary resources.

Delays and unpaid bills mount up

They lead to a decrease in cash receipts and an increase in working capital requirements . They can also give rise to additional costs associated with debt collection, late payment penalties and default interest. They may be due to financial difficulties, commercial disputes, administrative errors or bad faith on the part of customers.

How can you anticipate such a situation?

To anticipate such a situation, it's crucial to implement a proactive strategy. Here are three key points to develop:

Secure your cash flow

These are :

  • Draw up a realistic budget forecast taking into account current expenses, future investments and expected cash flows;

  • Diversify your sources of income to minimize the risks associated with a single source of financing ;

  • Implement cost optimization measures to avoid unnecessary expenses and maintain a healthy cash flow;

  • Establish payment policies with your suppliers to stagger due dates and avoid excessive cash outflows at any given time.

Optimize your accounts receivable

This involves :

  • Establish clear payment terms that reflect reality of your market and the financial capacity of your customers;

  • Implement rigorous monitoring of accounts receivable and issue reminders if necessary. Using a digital solution allows you to automate reminders to limit late payments.

  • Offer incentives for early payment or loyalty programs to encourage regular payments;

  • Regularly assess your customers' creditworthiness to anticipate potential payment problems.

Improve your forecasts

This involves :

  • Use cash management and financial forecasting tools to keep a close eye on your cash flow and identify trends;

  • Set up key performance indicators (KPIs) to assess your company's financial health and spot the warning signs of trouble;

  • Perform sensitivity analyses to assess the impact of different scenarios (such as sales variations or unforeseen costs) on your cash flow.

How do you deal with urgent cash requirements?

There are a number of ways to deal with urgent cash needs. Here are some examples of possible solutions:

Extending payments to suppliers

These are negotiate longer payment terms with suppliers This solution requires a good relationship with suppliers in order to negotiate more favorable payment terms.

Cash in faster

These are speed up collection of customer receivables This can be achieved by offering fast, secure payment methods, discounts or advantages for cash payments, penalties or interest on arrears, etc.

Contribute to a partner's current account

These are inject equity into the company, in the form of a loan or repayable advance, by one or more partners. This solution helps to strengthen the company's cash position and equity capital, without recourse to bank debt. It does, however, require the agreement of the partners and compliance with tax and social security regulations.

Using the bank overdraft

These are an authorization granted by the bank allowing the account holder to be in a debit situation for a limited period, usually one month. It can be used to meet a one-time, limited cash flow requirement, but it is subject to debit interest and bank charges.

Borrowing from the bank

Bank loans can take a variety of forms:

  • Revolving credit ;

  • Leasing ;

  • Supplier credit ;

  • Etc.

A bank loan provides quick access to cash, but it also means repayment of principal and interest and the guarantees or sureties to be provided to the bank.

Use our Hero payment solution

There are solutions for urgent cash needs. These include Hero , the first B2B checkout solution, which allows you to pay in instalments, defer payment, or collect customer payments immediately. When you make transactions, the platform advances the payment of your invoices or accounts receivable, so there's no lag in your cash flow. The principle is that the supplier receives the payment immediately, thanks to Hero, which advances it to you.

Similarly, if your customers are slow to pay your invoices, Hero can advance them to you.

Request a customized quote

When faced with an urgent need for cash, there are several solutions available to companies. Optimizing trade receivables, securing cash flow and improving forecasting are essential measures. In addition, platforms such as Hero offer flexible alternatives for responding effectively to an urgent need for cash .

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Écrit par

Valentin Orru

Head of growth