Cash is King.

Cash is king. Always is, but during volatile economic times, it is even more critical.

Let's expand cash to incorporate the concept of working capital. The pure definition is current assets (cash, accounts receivable, and inventory)
minus current liabilities (accounts payable and long-term debt due within one year).

How do you fare? Are you having difficulty meeting your current obligations timely? Did you look at your working capital? You should be at least 2:1 to be properly capitalized.

Well, you are where you are. How can you improve?

Converting current assets is a good start. It will improve cash but not working capital. Are you doing your very best to collect receivables? Find ways to be the most efficient.

If you have inventory, is it moving or turning fast enough? Do a thorough analysis. Dump slow-moving items, even though you may have fallen in love with them. In my banking days, we referred to excess inventory as the mother-in-law. Once she moves in, she never moves out! Convert as much as you can to cash.

Remember, accounts receivable and inventory cannot pay the maturing obligations and payroll, only cash can. The better you convert these to cash, the stronger you will be.

Are you looking at new equipment? Did you consider leasing or financing instead of writing that check? Preserve that working capital.

Now let's look at your building or office space. It may be financially appealing to purchase and fund with a mortgage, but you can't pay payroll on Friday with the 30% equity in your building. 

My basic advice - unless you have unlimited capital (defined as sufficient liquidity to run your business in both good and bad times) to fund your business, finance everything that you can to match the long-term benefit with a long-term liability. And don't buy the real estate, no matter how good it looks today.

Who successfully predicted the 2007-08 economic downfall? What do the tea leaves say now? Economists are moaning about an inverted yield curve. We are all moaning about the impact of uncertain tariffs. Can you weather the storm?

PS -  Many of the current mergers and acquisitions are not a coincidence.

A 1975 graduate of the Wharton School at the University of Pennsylvania, Harvey enjoyed a 20+ year career in commercial banking, exercising his “golden parachute” in 1996.  In his volunteer life, he is a past chair of the Small Business Banking Unit of the American Bankers Association, Easter Seal Society of New Jersey, the SAAGNY Foundation, PPAF EXPO, and Supplier Committee of PPAI.  He is also a past President of PPAF.  PPAI awarded him the H. Ted Olson Humanitarian Award in 2013.