What to Do When Your Business Runs Out of Cash

Before you do anything else, get the exact numbers. A cash crisis feels worse than it usually is until you know precisely where you stand. Many businesses that feel "out of cash" actually have 30–45 days of runway they haven't accounted for.

Not all obligations are equal. Some will trigger immediate legal consequences, employee departures, or irreversible damage if missed. Others can be negotiated, delayed, or stretched. Triage before you pay anything.

IRS payroll tax deposits (Form 941) are a "trust fund" — the money belongs to the IRS, not you, once payroll is processed. Failure to deposit triggers the Trust Fund Recovery Penalty: 100% of the unpaid amount, assessed personally against any officer who was responsible for collecting and paying it. This is the single most dangerous financial error a small business can make.

Emergency business funding exists specifically for this situation. The tradeoff: faster access means higher cost. Here's what's available by speed of access, along with honest cost information.

Most business owners avoid calling suppliers when they're in trouble. This is exactly backwards. A supplier who hears from you before an invoice goes past due has every reason to work with you. A supplier whose invoice bounces and who has to chase you has every reason to cut off your account, demand prepayment, or turn you over to collections.

Use a simple, direct script. Don't over-explain. Don't promise what you can't deliver. Give a specific date, not "as soon as we can."

Most suppliers will say yes to a specific plan. What they won't accept is silence. Document every agreement in writing — a follow-up email summarizing what you agreed to costs you 2 minutes and gives you both a record.

While working on the cash supply side, also pull the revenue levers you have available. These are high-speed, low-friction options that can generate immediate cash without taking on debt.

• Call your top 5–10 customers. Do you have any customers who normally pay Net-30 or Net-60 that you could ask for early payment in exchange for a 2–5% discount? Many B2B customers will take a discount if you ask. This is called an early payment incentive. "I'll take $4,800 now instead of $5,000 in 60 days" often works.
• Offer a flash sale or prepaid package. Retail, restaurant, and service businesses can offer a prepaid gift card or service package at a small discount (10–15%) to generate immediate revenue. Your loyal customers want to support you — give them a way to do it that benefits them too.
• Accelerate collection of overdue accounts receivable. Send a direct personal call — not a reminder email — to every customer with an outstanding invoice over 30 days. Offer to waive a late fee in exchange for immediate payment. A $500 call is worth more than a $500 fee that might never get collected.
• Require deposits or prepayment on new orders. If you normally deliver goods or services before collecting payment, require 50–100% upfront for new orders until the cash situation stabilizes. Most customers will accept this framed as a policy change.
• Sell unused equipment or inventory. What do you have sitting idle? Old equipment, excess inventory, unused supplies? A quick sale to another local business or through an online marketplace can generate immediate cash. Don't hold out for full price in a cash emergency.

• Cancel or pause non-essential subscriptions. Go through your bank statement and credit card statements from the last 60 days. How many recurring charges are there for software, tools, or services you're not actively using? Cancel immediately. Even $200/month compounds to $2,400/year.
• Pause or cut paid advertising. Stop any ad spend that doesn't have a measurable, direct connection to near-term revenue. Facebook, Google, display ads — if you can't directly tie a dollar of spend to a dollar of revenue, it stops until you're stable.
• Reduce orders to just-in-time levels. If you carry inventory, reduce new orders to match immediate demand only. Don't build stock when you need cash. This may mean some lost sales, but it preserves cash.
• Consider temporary staffing reduction. This is the hardest one. If a cash crisis is severe enough, reducing hours for non-essential staff for 2–4 weeks is sometimes necessary. Be transparent with employees. Most people can survive a temporary reduction if they understand the situation and trust they'll get through it.
• Negotiate your commercial lease. If rent is a significant expense and your landlord has faced vacancies, many will negotiate a temporary rent deferral or reduction during a documented business hardship. Frame it as avoiding a vacancy problem for them.

Once the immediate crisis is stabilized, start the recovery framework. The goal: build enough cash runway to ensure a short-term problem never becomes an existential one again.

• Build a 60-day cash reserve. The target is 60 days of operating expenses in a dedicated savings account. Start with 2 weeks and add to it monthly. At 60 days, a slow month doesn't become a crisis.
• Open a business line of credit before you need it. Apply when cash is good. A revolving line of credit acts as a bridge loan you can draw and repay — ideal for seasonal businesses or anyone with receivables timing mismatches.
• Shorten your payment terms. If you're extending Net-30 or Net-60 terms to customers, consider moving to Net-15 or Net-7 for new customers. Offer a 2% early payment discount if you need to incentivize it. Faster collection = more cash on hand.
• Track cash weekly, not monthly. Monthly bookkeeping review is too infrequent to catch a cash problem before it becomes a crisis. Run a simple weekly cash flow statement: deposits in, payments out, ending balance, comparison to prior week.
• Know your break-even number. Every business owner should know exactly how much revenue they need each month just to cover expenses. If you're hitting that number, you're surviving. If you're consistently above it, you're building. If you're below it for 2+ months, you have a structural problem, not a timing one.
• Build business credit now. A business with good credit (Dun & Bradstreet PAYDEX 80+, business credit score above 700) has dramatically more options during a crisis. See our step-by-step business credit guide to start building now.