Whether you’re the CEO, an investor or a board member of a business or nonprofit the following questions need to be frequently considered in today’s economic environment:

1. How liquid are our cash equivalents? If they aren’t immediately available or you will suffer a loss when you sell, the “cash equivalent” is not really liquid.
2. How many days in cash do you have on hand? This means that if cash stopped coming into the organization and your cash expenses continued at the current rate, how many days would the organization last?  I read in a recent Inc. article that Jim Collins, author of Built to Last and Good to Great, has enough cash on-hand to last one year.
3. What is your current ratio? When you divide current assets by current liabilities, what is the result?  Greater than one, you’re OK for the short-term.  Less than one and you need to start cash flow triage immediately.  Get on the phone with late paying customers, tamper down spending, start paying a bit slower, and defer any non-essential capital improvements/purchases.
4. What is the balance on the credit line & when is it up for renewal? If you are fully extended you have no cash cushion for emergencies and you’re in a weak negotiating position on renewal.  Take no comfort because the balance is small or zero as you may not have full access.  I’ve heard too many stories of banks arbitrarily reducing lines of long-standing customers.
5. Where will the year end up? Will you be profitable or will the year end in the red? Ending with a loss will limit what you can do for the foreseeable future.  It is something to avoid at almost all costs.  Hopefully you have been tracking against an operating budget and know where you can slim down to end the year at breakeven at the worst.  It would be prudent to prepare a new forecast looking out beyond the end of your operating year by several quarters.  As they say in football sometimes a the best offense is a good defense…if you can’t see the potential for problems because you don’t budget then you’re setting up your organization to fail.

As you read the above questions how are you feeling about your organization?  Do you have work to do?  Is your board on top of the situation or will your CFO be explaining the unpleasant reality?  Now is the time to act.